Economic Cooperation and Social Identity: Towards a Model of Economic Cross-Cultural Integration

In arguing that borders not only should be understood as economic barriers to trade, but also <p> as cultural barriers to interaction, this paper attempts to operationalize a broader interpretation of <p> borders with regards to economic cross-cultural integration. Thus, by formalizing the cultural <p> effects of borders as mental distances (interpreted as social identities), and by using an agentbased <p> simulation model, I analyze how the border affects, and is itself affected by, economic <p> integration. The model is based on two regions separated by a border. Based on expected payoffs <p> and mental distance, agents first choose whether to interact at home or to cross the border. Then, <p> agents choose their action in a simple PD game based on a general disposition of trust, as well as <p> the mental distance should the interaction partner be from across the border. The agent’s mental <p> distance and trust level are then updated according to the agent’s experience of the interaction <p> (positive or negative). The model generally reveals that underlying cultural processes may affect <p> the success of economic integration considerably, and suggests that the success of the integration <p> depends significantly (and in asymmetric ways) on mental distances between regions, on <p> economically vs. culturally motivated behavior, and on collectivistic vs. individualistic characters <p> of the regional cultures.