Economics Cultural bias in economic exchange is often overlooked. A study done at the Northwestern University suggests that the cultural perception that two countries have of each other plays a large factor in the economic activity between them. The study suggests that low bilateral trust between two countries results in less trade, less portfolio investment, and less direct investment. The effect is amplified for goods, as they are more trust-intensive.
econOmicS CUltural bias IN EconomiC eXchAnGe iS ofTEn overloOkEd. a Study Done aT tHe nOrtHWEsTeRn UniversiTY sugGeStS ThaT the CultuRal percEPtion tHAt Two cOunTries havE Of eACh OtheR PlAYs a LArge faCTOr iN The ecOnOmIC aCTivitY betweEN them. the sTudy suGgEsts That Low BIlAterAl tRUsT BETwEen two countrieS resuLTs In LEss TrAde, LeSS pORTFolio InVEsTMEnt, anD lESS DirecT InvestMent. THE EFFECt IS amplified for goOdS, as they ARe morE trust-Intensive.