Cultures of Trust

One day, around the time the United States invaded Iraq, Paola Sapienza was browsing a wine store near her home in Evanston, Illinois. She noticed something odd: all of the French wines were on sale. When she asked the sales clerk why, he told her, “These days, Americans don’t like anything French.” France had loudly opposed military action in Iraq, and everybody was buzzing about it.The experience got Sapienza, a professor of finance at the Kellogg School of Management, thinking—just how much do cultural biases affect the way goods are traded?As it turns out, quite a lot, according to a study of European countries that she published in The Quarterly Journal of Economics with longtime collaborators Luigi Guiso, a professor at the European University Institute in Italy, and Luigi Zingales, a professor at the University of Chicago. This trio of Italians found that the extent to which people trust citizens of another country plays a surprisingly large role in how much countries trade with each other and invest in one another.Read more at...Kellogg Insight, November 2011.