Impact of Trade Openness on Culture: Based on Threshold Effect Caused by Inequality of Income Distribution

What is the impact of trade openness on culture of a country? We pool panel data from 40 countries in five years (1984, 1989, 1994, 1999, and 2004) to study this issue empirically. The result shows that trade openness displays a promoting effect on culture of a country. But, this effect is significantly different in the countries where inequality of income distribution is extremely great. Besides, this conclusion is robust after solving endogeneity of trade openness variable by IV-GMM. Furthermore, threshold regression proposed by HANSEN (1999) is introduced to study the non-linear relationship between trade openness and culture caused by inequality of income distribution. It is found that a single threshold is significant in the model, with threshold level (Gini coefficient) of 0.414. The positive impact of trade openness would decline by 64% when inequality of income distribution exceeds the threshold level of 0.414.