“Neighbors in values”: A new dataset of cultural distances between countries based on individuals’ values, and its application to the study of global trade

The paper proposes a method for evaluating the cultural distance between countries by analyzing the differences in values of individuals residing in these countries. These differences are assessed with an innovative approach based on MELNN ensemble of five metrics (Mahalanobis distance, Euclidean distance, L-distance, as well as normalized versions of Euclidean and L-distances), compiled through factor analysis. For each individual we find “neighbors in values”, i.e. other individuals with possibly closest MELNN scores. We proceed to build a network interaction model on the basis of MELNN scores. Analyzing the closeness to each individual from country A of the whole multitude of individuals residing in country B eventually allows to define the cultural distance between these countries. We use the thus obtained cultural distances in a gravity model, where they prove to be a significant factor influencing bilateral trade.