Genetic Distance as a Barrier to International Trade

We investigate the impact of genetic distance on international trade flows. Using a new data set covering the universe of global trade, we show that genetic differences are an important barrier to international trade in addition to transportation costs. Country pairs with a high genetic distance are less likely to trade with each other (extensive margin) and if they do trade, we find that genetic distance negatively affects the volume and number of goods traded (intensive margin). Our findings are robust to including a vast array of micro-geographic controls as well as linguistic and religious distance variables. The inverse relationship between trade flows and genetic distance constitutes an important channel through which genetic distance affects income differences across countries.