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Social trust and international trade: the interplay between social trust and formal finance

Devesh Roy (), Abdul Munasib () and Xing Chen ()

Review of World Economics (Weltwirtschaftliches Archiv), 2014, vol. 150, issue 4, 693-714

Abstract: Social trust can facilitate access to alternative sources of finance to firms when formal finance is scarce or entails large transaction costs, especially in economies with less developed financial systems. Since exporting firms are relatively more dependent on external finance, we find that high levels of social trust in an economy with a relatively less developed financial sector have positive effects on exports. We combine the World Values Survey that provides information on social values and the UN Comtrade data for the period 1995–2007. Our analysis is carried out at the level of bilateral trade in 2-digit and 3-digit digit industry classifications that not only allows controlling for industry-level heterogeneities but also mitigates concerns of potential reverse causality. Copyright Kiel Institute 2014

Keywords: Social trust; Financial development; 2-Digit industry; 3-Digit industry; F10; O16; O17; O24 (search for similar items in EconPapers)
Date: 2014
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Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

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