Abstract
This paper investigates the presence of homophily in global trade. The prevalent theoretical intuition and justification for relevance of homophily is dissected into two distinct mechanisms: concord effect and nexus effect. Using post-COVID cross-sectional data from 2021, this paper empirically confirms the presence of homophily in global trade along language and (tertiary) education similarities. In other words, Two countries that are more similar in language and in (tertiary) education attainment tend to trade more. While concord and nexus effects can explain homophily along language similarities in global trade, they fall short for explaining homophily along education similarities. Additionally, religious similarities negatively impact global trade, and the reason for this observed damping effect of religion similarity is unaccounted by current literature. This paper also discovers two empirical associations - one positive between religious similarity, social connectedness, and regional trade agreement participation; one negative between educational similarity and social connectedness - both lacking theoretical backing. These findings highlight the need for further theoretical exploration to understand the nuanced impacts of these associations on global trade