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

Author

Listed:
  • Devesh Roy

    ()

  • Abdul Munasib

    ()

  • Xing Chen

    ()

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

Suggested Citation

  • Devesh Roy & Abdul Munasib & Xing Chen, 2014. "Social trust and international trade: the interplay between social trust and formal finance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 693-714, November.
  • Handle: RePEc:spr:weltar:v:150:y:2014:i:4:p:693-714
    DOI: 10.1007/s10290-014-0197-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Social trust; Financial development; 2-Digit industry; 3-Digit industry; F10; O16; O17; O24;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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