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Individualism, collectivism, and trade

Published online by Cambridge University Press:  14 March 2025

Aidin Hajikhameneh  and
Erik O. Kimbrough Open the ORCID record for Erik O. Kimbrough [Opens in a new window]
Aidin Hajikhameneh*
Affiliation:
Institute for the Study of Religion, Economics and Society, Chapman University, 338 N. Glassell, Orange, CA 92866, USA
Erik O. Kimbrough*
Affiliation:
Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC V5A 1S6, Canada Smith Institute for Political Economy and Philosophy, Chapman University, One University Drive, Orange, CA 92866, USA
*
hajikhameneh@chapman.edu
ekimbrou@chapman.edu
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Abstract

While economists recognize the important role of formal institutions in the promotion of trade, there is increasing agreement that institutions are typically endogenous to culture, making it difficult to disentangle their separate contributions. Lab experiments that assign institutions exogenously and measure and control individual cultural characteristics can allow for clean identification of the effects of institutions, conditional on culture, and help us understand the relationship between behavior and culture, under a given institutional framework. We focus on cultural tendencies toward individualism/collectivism, which social psychologists highlight as an important determinant of many behavioral differences across groups and people. We design an experiment to explore the relationship between subjects’ degree of individualism/collectivism and their willingness to abandon a repeated, bilateral exchange relationship in order to seek potentially more lucrative trade with a stranger, under enforcement institutions of varying strength. Overall, we find that individualists tend to seek out trade more often than collectivists. A diagnostic treatment and additional analysis suggests that this difference may reflect both differential altruism/favoritism to in-group members and different reactions to having been cheated in the past. This difference is mitigated somewhat as the effectiveness of enforcement institutions increases. Nevertheless we see that cultural dispositions are associated with willingness to seek out trade, regardless of institutional environment.

Keywords

IndividualismCollectivismExchangeTrustExperiments

JEL classification

C7: Game Theory and Bargaining Theory C9: Design of Experiments
Type
Original Paper
Information
Experimental Economics , Volume 22 , Issue 2 , 15 June 2019 , pp. 294 - 324
Copyright
Copyright © 2017 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-017-9560-1) contains supplementary material, which is available to authorized users.

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