Abstract

http://ssrn.com/abstract=711187
 
 

References (36)



 
 

Citations (186)



 


 



Cultural Biases in Economic Exchange


Luigi Guiso


Einaudi Institute for Economics and Finance (EIEF)

Paola Sapienza


Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Luigi Zingales


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI)

January 2005

CEPR Discussion Paper No. 4837

Abstract:     
How much do cultural biases affect economic exchange? We try to answer this question by using the relative trust European citizens have for citizens of other countries. First, we document that this trust is affected not only by objective characteristics of the country being trusted, but also by cultural aspects such as religion, a history of conflicts, and genetic similarities. We then find that lower relative levels of trust toward citizens of a country lead to less trade with that country, less portfolio investment, and less direct investment in that country, even after controlling for the objective characteristics of that country. This effect is stronger for good that are more trust intensive and doubles or triples when trust is instrumented with its cultural determinants. We conclude that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

Number of Pages in PDF File: 57

Keywords: Trust, priors and expectations, trade and exchange, financial portfolio, FDI, culture

JEL Classification: D02, D84, F10, F30

working papers series


Date posted: April 26, 2005  

Suggested Citation

Guiso, Luigi and Sapienza, Paola and Zingales, Luigi, Cultural Biases in Economic Exchange (January 2005). CEPR Discussion Paper No. 4837. Available at SSRN: http://ssrn.com/abstract=711187

Contact Information

Luigi Guiso (Contact Author)
Einaudi Institute for Economics and Finance (EIEF) ( email )
Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)
HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/
Paola Sapienza
Northwestern University - Kellogg School of Management - Department of Finance ( email )
Evanston, IL 60208
United States
847-491-7436 (Phone)
847-491-5719 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Luigi Zingales
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3196 (Phone)
773-834-2081 (Fax)

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
University of Chicago - Polsky Center for Entrepreneurship
Chicago, IL 60637
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Feedback to SSRN


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Downloads: 30
References:  36
Citations:  186

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