Gabriel Felbermayr and Farid Toubal have a go at the Eurovision Song Contest. I just wonder how they controlled for quality, but otherwise:
Controlling for the quality of the song (using song-specific fixed effects), the Eurovision scores reveal cultural proximity between pairs of countries. In economics, cultural proximity is related to common language, religious proximity, or to common legal environment. In sociology, cultural proximity has a broader definition that includes history, clothing style, living pattern, and culture in several senses. Cultural proximity is not necessarily reciprocal and can vary across time. A country can display respect and sympathy for the cultural, societal, and technological achievements of another country without this feeling necessarily being reciprocal and everlasting.
And in case you think this is all fun, think again. Economists never just sit down and enjoy the music:
So far the literature has had little to say on the mechanisms through which cultural proximity affects bilateral trade volumes. There are two channels through which cultural proximity matters for international trade. Cultural proximity is related to lower communication and transaction costs. This translates into higher bilateral trade volumes due to lower trade costs. On the other hand, cultural proximity may be related to preferences. Then, culturally close countries trade more because they have strong tastes for each otherís products. We attempt to disentangle the trade-cost and the preference channels of cultural proximity. This distinction is important, because (multilateral) cultural distance is related to a country’s per capita income and welfare only if it affects trade volumes via the trade-cost channel.
If the Eurovision scores reflect the broad sociological notion of cultural proximity, one can exploit their time and within-pair variance to econometrically separate the preference channel from the trade-cost channel. For this purpose, we use two econometric models, which both help to identify the preference effect of cultural proximity separately. The first strategy assumes that the bilateral trade-cost channel is not affected by swings in bilateral attitudes or in the sheer popularity of a country: trade costs depend on the deep time-invariant components of cultural proximity (linguistic, religious or ethnic ties). In contrast, the preference channel depends on more short-lived fads and fashions, as well as on the time-invariant factors.
The second strategy assumes that the trade-cost channel depends only on the symmetric component of cultural proximity. This follows widespread practice in the empirical and theoretical trade literature, where trade costs are typically considered symmetric (the tunnel between Britain and France is the same in both directions). The preference channel, however, need not be symmetric (the French may dislike the British more than the British dislike the French).
Comfortingly, both empirical strategies yield similar results. Our estimates imply that one-third of the total effect of cultural proximity on bilateral trade is due to the preference effect. Hence, only about two-thirds of the total effect of cultural distance can be interpreted in welfare-theoretic terms.