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The Trust Project
Research at the Kellogg School of Management has explored trust and financial transactions across three key studies. These papers, which have been published in esteemed journals, delve into various facets of trust's impact on economic behavior.
Italy was pivotal for trust research by sociologists because it offered a unique context to study generalized trust. The country has experienced significant variation across regions since its unification about 150 years ago, presenting an ideal laboratory setting for financial economists interested in understanding the relationship between trust and financial contracts.
The first paper, The Role of Social Capital in Financial Contracts, investigates how differing levels of generalized trust the propensity to trust strangers correlate with access and usage of fundamental financial tools like banking services, stock investment, and insurance products. The study reveals that areas with lower social capital and reduced trust t to have less widespread use of such contracts.
The second paper, Trusting the Stock Market, expands on this concept by examining a representative sample of Dutch households living in regions with consistent legal frameworks but varying levels of trust. It demonstrates that individuals with low levels of trust are significantly less likely to engage in stock market investments and purchase insurance compared to those who exhibit more generalized trust.
The third paper, Cultural Biases in Economic Exchange, tackles the question whether bilateral trust impacts financial transactions between countries. The findings suggest that when there is a higher level of mutual trust between nations, citizens from one country are more likely to invest in stocks from another country or increase trade and direct foreign investment.
This research underscores how trust-both at individual and societal levels-affects economic decision-making and market dynamics. These studies collectively contribute to our understanding of the complex interplay between trust, social capital, cultural biases, and financial behavior, providing valuable insights for policymakers, businesses, and society as a whole.
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