Title: Cultural Biases in Economic Exchange?
Author: Luigi Guiso, Paola Sapienza and Luigi Zingales
Scope: 3 stars
Readability: 2 stars
My personal rating: 4 stars
See more on my book rating system

Topic of Article

The authors research levels of trust between European nations to see if it affects levels of economic trade.

My Comments

This article highlights an important point about economic trade. While economists assume humans are rational actors, trust plays a very important role. Since people trust others who are more similar to themselves culturally, they are more willing to trade with them. So culture plays an important role in economics.

There is also an important literature showing that diffusion of technologies is more likely between culturally similar people.

Key Take-aways

• Economic trade is closely related to trust. The more trust, the more trade.
• People with high levels of trust in strangers engage in more economic trade than people with low levels of trust.
• People trust in the following order:
  • People of the same culture trust each other the most.
  • People with cultures similar to their own
  • People with culture very different from their own are trusted the least.
• There is general agreement as to which nations can be trusted least and most. Northern Europeans are trusted more than Southern Europeans.

Important Points from Article

Study based upon Europe.

People within the same culture trust each other the most.

Nations that trust the most are the most trusted by citizens of other nations (Sweden, Norway, Denmark, Neth, Fin)

Nations that trust the least are the least trusted by citizens of other nations (Italy, Greece, Port, Spain)

Trust between cultures is caused by religious similarity and somatic similarity.

Distrust between cultures is caused by a long history of war.

People with higher levels of trust have higher levels of international trade, foreign direct investment and portfolio investment.