Work

Cultural Biases in Economic Exchange? *

Year: 2009

Type: article

Abstract: How much do cultural biases affect economic exchange? We answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as their history of conflicts and their religious, genetic, and somatic similarities. We then find that lower bilateral trust leads to less trade between two countries, less portfolio investment, and less direct investment, even after controlling for the characteristics of the two countries. This effect is stronger for goods that are more trust intensive. Our results suggest that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

Source: The Quarterly Journal of Economics

DOI: 10.1162/qjec.2009.124.3.1095

Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales

Institutions: European University Institute, Northwestern University, Center for Economic and Policy Research, National Bureau of Economic Research, University of Chicago

Language: English

Topic: Culture, Economy, and Development Studies

Subfield: Development

Field: Social Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3021197892

FWCI: 205.8

Cites: 84

Cited by: 2,162

Related to: 10