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The Impact of Cultural Aversion on Economic Exchange: Evidence from Shocks to Sino-Japanese Relations

35 Pages Posted: 15 Mar 2012 Last revised: 2 Feb 2014

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Yasushi Hamao

Center on Japanese Economy and Business; University of Southern California - Marshall School of Business - Finance and Business Economics Department

Yongxiang Wang

University of Southern California - Marshall School of Business

Date Written: January 2013

Abstract

We study the impact of cultural aversion on international economic relations by analyzing market reaction to two major adverse shocks to Sino-Japanese relations in 2005 and 2010. Japanese companies with high China exposure decline disproportionately during each event window; Chinese companies with high Japanese exports similarly suffer relative declines. The effect on Japanese companies is concentrated in industries dominated by Chinese state-owned enterprises, where there is greater incentive and ability to intervene, while the negative impact on Chinese firms is primarily for consumer-focused companies. Our results suggest an important impact of cultural frictions on economic relations, and highlight that institutional context is important for understanding the mechanisms underlying this effect.

Keywords: cultural bias, China-Japan relations, consumer sentiment, trade

JEL Classification: F13, F51, G14, G15

Suggested Citation

Fisman, Raymond J. and Hamao, Yasushi and Wang, Yongxiang, The Impact of Cultural Aversion on Economic Exchange: Evidence from Shocks to Sino-Japanese Relations (January 2013). AFA 2013 San Diego Meetings Paper; Marshall School of Business Working Paper No. FBE 4.13. Available at SSRN: https://ssrn.com/abstract=2022214 or http://dx.doi.org/10.2139/ssrn.2022214

Raymond Fisman

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Yasushi Hamao

Center on Japanese Economy and Business ( email )

3022 Broadway
New York, NY 10027
United States
310-717-0503 (Phone)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
310-717-0503 (Phone)

Yongxiang Wang (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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