Individualism, Collectivism and Trade

56 Pages Posted: 25 Jan 2017 Last revised: 14 Dec 2017

See all articles by Aidin Hajikhameneh

Aidin Hajikhameneh

San Jose State University

Erik O. Kimbrough

Chapman University - The George L. Argyros School of Business & Economics

Date Written: November 30, 2017

Abstract

While economists recognize the important role of formal institutions in the promotion of trade, there is increasing agreement that institutions are typically endogenous to culture, making it difficult to disentangle their separate contributions. Lab experiments that assign institutions exogenously and measure and control individual cultural characteristics can allow for clean identification of the effects of institutions, conditional on culture, and help us understand the relationship between behavior and culture, under a given institutional framework. We focus on cultural tendencies toward individualism/collectivism, which social psychologists highlight as an important determinant of many behavioral differences across groups and people. We design an experiment to explore the relationship between subjects' degree of individualism/collectivism and their willingness to abandon a repeated, bilateral exchange relationship in order to seek potentially more lucrative trade with a stranger, under enforcement institutions of varying strength. Overall, we find that individualists tend to seek out trade more often than collectivists. A diagnostic treatment and additional analysis suggests that this difference may reflect both differential altruism/favoritism to in-group members and different reactions to having been cheated in the past. This difference is mitigated somewhat as the effectiveness of enforcement institutions increases. Nevertheless we see that cultural dispositions are associated with willingness to seek out trade, regardless of institutional environment.

Keywords: individualism, collectivism, exchange, trust, experiments, culture

JEL Classification: C7, C9

Suggested Citation

Hajikhameneh, Aidin and Kimbrough, Erik O., Individualism, Collectivism and Trade (November 30, 2017). Experimental Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2904691 or http://dx.doi.org/10.2139/ssrn.2904691

Aidin Hajikhameneh

San Jose State University ( email )

San Jose, CA 95192
United States

HOME PAGE: http://sites.google.com/site/aidinhajikhameneh/home

Erik O. Kimbrough (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

One University Dr
Orange, CA 92866
United States

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