Cultural Differences and Economic Globalization

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Cultural differences significantly hinder economic integration, as shown through rigorous statistical analyses. The book reveals that increased cultural distance leads to higher transaction costs, which negatively impact trade volumes and the success of trade agreements. Additionally, it highlights a decline in foreign direct investment towards culturally distant regions and a negative correlation between migration flows and cultural distance. The text also addresses concerns that intensified integration may lead to cultural homogeneity, challenging the notion that cultural differences diminish over time.