Downsides of social capital
Year: 2014
Type: article
Abstract: In their article, Levine et al. (1) test the hypothesis that ethnic homogeneity leads to greater errors in the pricing of stocks because of overreliance in the activities and decisions of coethnics. Excessive trust in others, created by ethnic homogeneity, can thus eventuate in price bubbles negatively affecting not only the traders, but the entire economy. The authors test this theory on the basis of two realistic, tightly controlled experiments comparing ethnically homogenous and heterogeneous trading networks. One experiment was conducted in North America, where the relevant ethnics groups were Whites, Latinos, and African Americans; the second was in Southeast Asia, with subjects of Chinese, Indian, and Malaysian origin. The distinctness of the ethnic groups compared in both settings adds to the generalizability of the findings.
Author: Alejandro Portes
Institutions: University of Miami, Princeton University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Reduced inequalities
Open Access status: green
OpenAlex ID: W2012759203