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Effects of Islamic religiosity on bilateral trust in trade: The case of Turkish exports

Alessia Lo Turco () and Daniela Maggioni ()

Journal of Comparative Economics, 2018, vol. 46, issue 4, 947-965

Abstract: Using a rich firm level data set for Turkish manufacturing, we test whether sharing similar religious beliefs with potential contracting parties drives a firm’s first time entry into export markets. We exploit variation in the practice of Islam across Turkish NUTS3 regions and we find that firms located in regions characterised by stronger religiousness are more likely to enter export destinations with a higher share of Muslims among their population. This result is robust to the control for past trade, common language, cultural and migration ties as well as for selective trade policy in favour of politically connected religious business groups. In particular, religious proximity eases export entry for producers of “trust intensive” goods, it favours subsequent foreign market entries and reduces the export exit probability. All in all, our evidence supports an export enhancing effect of religious proximity working through export sunk costs reduction rather than through similarity in preferences.

Keywords: Islam; Export entry; Uncertainty; Religious proximity (search for similar items in EconPapers)
JEL-codes: F11 F14 D22 D80 N30 (search for similar items in EconPapers)
Date: 2018
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