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- Title
CULTURAL BIASES IN ECONOMIC EXCHANGE?
- Authors
Guiso, Luigi; Sapienza, Paola; Zingales, Luigi
- 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.
- Subjects
EUROPE; ECONOMICS &; culture; INVESTMENTS; ECONOMICS; RELIABILITY (Personality trait); CONDUCT of life; POPULATION; INTERNATIONAL trade; INTERNATIONAL economic relations
- Publication
Quarterly Journal of Economics, 2009, Vol 124, Issue 3, p1095
- ISSN
0033-5533
- Publication type
Article
- DOI
10.1162/qjec.2009.124.3.1095