Advanced Search
MyIDEAS: Login to save this article or follow this journal

Tolerance for uncertainty and the growth of informationally opaque industries

Contents:

Author Info

  • Huang, Rocco R.

Abstract

Hofstede (1980)’s cross-country psychological survey of IBM employees shows that some countries (societies) are systematically more tolerant of uncertainty, while tolerance of uncertainty is shown by Rigotti et al. (2003)’s model to be essential to the growth of “emerging sectors about which little is known”. We use Durnev, Morck and Yeung (2004)’s methodology to identify these informationally opaque industries. We hypothesize that, countries characterized by high uncertainty aversion (measured by Hofstede’s indicator) will, because of uncertainty aversion, grow disproportionately slower in industrial sectors where information is less available (proxied by lower informativeness of stock prices in the U.S., Durnev et al. 2004). Using the Rajan and Zingales (1998) “differences-in-differences” methodology, in 34 countries and 36 manufacturing industries, we indeed find robust evidence for this pattern of industrial growth. We also show that national uncertainty aversion is not proxying for under-development of financial sector, inadaptability of civil law systems, lower level of economic development, or many other factors. Our results are also robust when we use religious (Protestant/Catholic) composition to instrument for national uncertainty aversion.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VBV-4R0KTD9-1/2/ef63402bcadeed49ff57bde62f278490
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 87 (2008)
Issue (Month): 2 (October)
Pages: 333-353

as in new window
Handle: RePEc:eee:deveco:v:87:y:2008:i:2:p:333-353

Contact details of provider:
Web page: http://www.elsevier.com/locate/devec

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Thorsten Beck & Ross Levine, 2002. "Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?," NBER Working Papers 8982, National Bureau of Economic Research, Inc.
  2. Allen, Franklin & Gale, Douglas, 1998. "Diversity of Opinion and Financing of New Technologies," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-29, C.V. Starr Center for Applied Economics, New York University.
  3. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
  4. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 949-995, October.
  5. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2002. "People's Opium? Religion and Economic Attitudes," NBER Working Papers 9237, National Bureau of Economic Research, Inc.
  6. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," NBER Working Papers 7563, National Bureau of Economic Research, Inc.
  7. Raymond Fisman & Inessa Love, 2002. "Trade Credit, Financial Intermediary Development and Industry Growth," NBER Working Papers 8960, National Bureau of Economic Research, Inc.
  8. Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(2), pages 445-470, April.
  9. Fernández, Raquel & Fogli, Alessandra, 2005. "Fertility: The Role of Culture and Family Experience," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5221, C.E.P.R. Discussion Papers.
  10. Rene M. Stulz & Rohan Williamson, 2001. "Culture, Openness, and Finance," NBER Working Papers 8222, National Bureau of Economic Research, Inc.
  11. Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2002. "The Social Multiplier," Harvard Institute of Economic Research Working Papers 1968, Harvard - Institute of Economic Research.
  12. Juan Botero & Simeon Djankov & Rafael Porta & Florencio C. Lopez-De-Silanes, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(4), pages 1339-1382, November.
  13. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  14. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
  15. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1251-88, November.
  16. Rocco Huang, 2005. "Distance and Trade: Disentangling unfamiliarity effects and transport cost effects," International Trade, EconWPA 0511010, EconWPA.
  17. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Trusting the Stock Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5288, C.E.P.R. Discussion Papers.
  18. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Cultural Biases in Economic Exchange," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4837, C.E.P.R. Discussion Papers.
  19. Arturo Bris & William N. Goetzmann & Ning Zhu, 2003. "Efficiency and the Bear: Short Sales and Markets around the World," Yale School of Management Working Papers, Yale School of Management ysm321, Yale School of Management.
  20. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Trust in Large Organizations," NBER Working Papers 5864, National Bureau of Economic Research, Inc.
  21. Bae, Kee-Hong & Bailey, Warren & Mao, Connie X., 2006. "Stock market liberalization and the information environment," Journal of International Money and Finance, Elsevier, Elsevier, vol. 25(3), pages 404-428, April.
  22. Art Durnev & Randall Morck & Bernard Yeung, 2004. "Value-Enhancing Capital Budgeting and Firm-specific Stock Return Variation," Journal of Finance, American Finance Association, American Finance Association, vol. 59(1), pages 65-105, 02.
  23. Stijn Claessens & Luc Laeven, 2003. "Financial Development, Property Rights, and Growth," Journal of Finance, American Finance Association, American Finance Association, vol. 58(6), pages 2401-2436, December.
  24. Nicola Cetorelli & Michele Gambera, 1999. "Banking market structure, financial dependence and growth: international evidence from industry data," Working Paper Series, Federal Reserve Bank of Chicago WP-99-8, Federal Reserve Bank of Chicago.
  25. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  26. Arturo Galindo & Alejandro Micco, 2001. "Creditor Protection and Financial Cycles," Research Department Publications, Inter-American Development Bank, Research Department 4249, Inter-American Development Bank, Research Department.
  27. Carlin, Wendy & Mayer, Colin, 2003. "Finance, investment, and growth," Journal of Financial Economics, Elsevier, Elsevier, vol. 69(1), pages 191-226, July.
  28. Raymond Fisman & Inessa Love, 2003. "Financial Dependence and Growth Revisited," NBER Working Papers 9582, National Bureau of Economic Research, Inc.
  29. Kan Li & Randall Morck & Fan Yang & Bernard Yeung, 2004. "Firm-Specific Variation and Openness in Emerging Markets," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 658-669, August.
  30. Artyom Durnev & Randall Morck & Bernard Yeung & Paul Zarowin, 2003. "Does Greater Firm-Specific Return Variation Mean More or Less Informed Stock Pricing?," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 41(5), pages 797-836, December.
  31. Mukerji, S., 1997. "Ambiguity aversion and incompleteness of contractual form," Discussion Paper Series In Economics And Econometrics 9715, Economics Division, School of Social Sciences, University of Southampton.
  32. repec:hal:journl:halshs-00174539 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Fidrmuc, Jana P. & Jacob, Marcus, 2010. "Culture, agency costs, and dividends," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 321-339, September.
  2. Rocco Huang, 2005. "Distance and Trade: Disentangling unfamiliarity effects and transport cost effects," International Trade, EconWPA 0511010, EconWPA.
  3. Tamini, Lota Dabio, 2012. "Optimal quality choice under uncertainty on market development," Working Papers, Structure and Performance of Agriculture and Agri-products Industry (SPAA) 148589, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  4. Mehri, Meryem, 2014. "The Differential Effects of Law, Culture and Political Risk on Fees, Performance and Risk-Taking Behavior of Islamic and Conventional Funds," Economics Papers from University Paris Dauphine 123456789/13099, Paris Dauphine University.
  5. Inklaar, Robert & Yang, Jing, 2012. "The impact of financial crises and tolerance for uncertainty," Journal of Development Economics, Elsevier, Elsevier, vol. 97(2), pages 466-480.
  6. Giordani, Paolo E. & Schlag, Karl H. & Zwart, Sanne, 2010. "Decision makers facing uncertainty: Theory versus evidence," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(4), pages 659-675, August.
  7. Feijen, Erik, 2005. "Do incumbents manipulate access to finance during banking crises?," Policy Research Working Paper Series 3660, The World Bank.
  8. Anderson, Christopher W. & Fedenia, Mark & Hirschey, Mark & Skiba, Hilla, 2011. "Cultural influences on home bias and international diversification by institutional investors," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(4), pages 916-934, April.
  9. Tamini, Lota D., 2012. "Optimal quality choice under uncertainty on market development," MPRA Paper 40845, University Library of Munich, Germany.
  10. Guido Cozzi & Paolo Giordani, 2011. "Ambiguity attitude, R&D investments and economic growth," Journal of Evolutionary Economics, Springer, Springer, vol. 21(2), pages 303-319, May.
  11. Mehri, Meryem, 2014. "Differential Effects of Law, Culture and Political Risk on Fees, Performance and Risk-taking Behavior of Mutual Fund Managers," Economics Papers from University Paris Dauphine 123456789/13772, Paris Dauphine University.
  12. Rudiger Ahrend & Cyrille Schwellnus, 2012. "Do investors disproportionately shed assets of distant countries during global financial crises?: The role of increased uncertainty," OECD Journal: Economic Studies, OECD Publishing, OECD Publishing, vol. 2012(1), pages 1-20.
  13. : Jana P. Fidrmuc & Marcus Jacob, 2010. "Culture, Agency Costs and Dividends," Working Papers, Warwick Business School, Finance Group wpn10-01, Warwick Business School, Finance Group.
  14. Roxana Mihet, 2013. "Effects of culture on firm risk-taking: a cross-country and cross-industry analysis," Journal of Cultural Economics, Springer, Springer, vol. 37(1), pages 109-151, February.
  15. Roxana Mihet, 2012. "Effects of Culture on Firm Risk-Taking," IMF Working Papers 12/210, International Monetary Fund.
  16. Gilad D. Aharonovitz & Nathan Skuza & Faysal Fahs, 2009. "Can Integrity Replace Institutions? Theory and Evidence," CESifo Working Paper Series 2730, CESifo Group Munich.
  17. Pascal L. Ghazalian, 2012. "Home Bias in Primary Agricultural and Processed Food Trade: Assessing the Effects of National Degree of Uncertainty Aversion," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 265-290, 06.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:87:y:2008:i:2:p:333-353. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.