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Linguistic Distance and Market Integration in India

Published online by Cambridge University Press:  26 January 2021

James Fenske Open the ORCID record for James Fenske [Opens in a new window]  and
Namrata Kala
James Fenske
Affiliation:
Professor, University of Warwick – Economics, Gibbet Hill Road Coventry CV4 7AL, United Kingdom of Great Britain and Northern Ireland. E-mail: J.Fenske@warwick.ac.uk.
Namrata Kala
Affiliation:
Assistant Professor, MIT Sloan School of Management, Massachusetts Institute of Technology Cambridge, MA. E-mail: kala@mit.edu.
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Abstract

The role of cultural distance in market integration, particularly in the developing world, has received relatively little attention. Using prices from more than 200 South Asian markets spanning 1861 to 1921, we show that linguistic distance correlates negatively with market integration. A one-standard-deviation increase in linguistic distance predicts a reduction in the price correlation between two markets of 0.121 standard deviations for wheat, 0.181 for salt, and 0.088 for rice. While factors like genetic distance, literacy gaps, and railway connections are correlated with linguistic distance, they do not fully explain the correlation between linguistic distance and market integration.

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The Journal of Economic History , Volume 81 , Issue 1 , March 2021 , pp. 1 - 39
Copyright
© The Economic History Association 2021

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Footnotes

We are grateful to Latika Chaudhary, Martin Fiszbein, Marc Klemp, Alan Taylor, Romain Wacziarg, and to audiences at the Association for the Study of Religion, Economics, and Culture, George Mason University, Pontificia Universidad Católica de Chile, the University of Manchester, the University of Toulouse, and the University of Warwick for their comments. Extra thanks are due to Marlous van Waijenburg for sharing additional price data with us, and to Paradigm Data Services (inquire@pdspl.com), Connie Yu and Mina Rhee for their assistance in data entry.

References

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