Geographical distance has been measured as the distance from home to foreign ‘as the
bird flies’. Distance is related to the costs of physical transport of goods and persons, an
important part of trading costs. Not all countries in our data set were represented in the
database for bilateral distances. For these countries, proxies were constructed using
distances from neighbouring countries that were included in the database.
Common border is a dummy variable that indicates whether two countries are adjacent.
As argued in the main text, this may independently promote bilateral trade. For countries in
our data set that had no adjacency data available from the main source, the CIA factbook
(http://www.cia.gov/cia∕publications∕factbook/) was used to determine whether they shared
borders with any other country in the data set.
To assess commonality in primary language, we used a database that distinguished
fourteen languages: Arabic, Burmese, Chinese, Dutch, English, French, German, Greek,
Korean, Malay, Persian, Portuguese, Spanish and Swedish. In case none of these applied or
no data were available, the categories ‘other language’ and ‘non available’ were assigned.
Using the CIA factbook, these countries have been checked. A dummy variable reflects
whether or not two countries have the same primary language, an important aspect of
cultural similarity.
Whether pairs of countries take part in common trade agreements has been assessed
using WTO data on major regional integration agreements. A dummy variable (common
trade block) indicates whether a pair of countries enters into at least one common trade
block.
Cultural and/or historical ties between countries may also consist of a common dominant
religion or a shared colonial past. Data for religion and colonial background have been
taken from Sala-i-Martin (1997). Percentages of the population that adhere to one of seven
major religions are presented. These religions are: Buddhism, Catholicism, Confucianism,
Hinduism, Jewish religion, Islam, and Protestantism. For some countries, two religions
were equally dominant over the others. These countries entered into the analysis with both
religions as dominant religion. Commonality of dominant religion implies a value of 1 for
the dummy variable ‘common religion’.
The dummy variable ‘common colony’ reflects for each pair of countries whether both
of them share a similar colonial history. The data considered the British, French and
17
Bilateral Trade Flows and Institutions