Religious Attitudes and Home Bias: Theory and New Evidence from Primary Data

• Author: Gianpaolo Rossini,Carlo Reggiani,Eugenio Zucchelli,Martin A. Leroch
• Published date: 01 May 2014
• Date: 01 May 2014
• DOI: http://doi.org/10.1111/rode.12092

Religious Attitudes and Home Bias: Theory and

New Evidence from Primary Data

Martin A. Leroch, Carlo Reggiani, Gianpaolo Rossini, and

Eugenio Zucchelli*

Abstract

This paper examines the relationship between religion and home bias. A theoretical framework is proposed

suggesting that countries may show a certain degree of religion-enhanced international altruism associated

with a lower home bias. These predictions are investigated empirically using original individual-level data

from a survey on religious attitudes and home bias that was designed and collected in 15 countries. Con-

trary to previous evidence, the empirical investigation suggests that religious denominations may not play

an important role in determining home bias. The findings partly corroborate the hypothesis that an open

and tolerant attitude towards religion may enhance trust and altruism and, hence, may have a pro-trade

effect by lowering home bias. It is concluded that models investigating the relationship between religion

and home bias should incorporate different aspects of religion beyond affiliations and should consider dif-

ferent dimensions of home bias.

1. Introduction

Home bias (HB) is a well-documented phenomenon in finance and trade and refers to

a preference for goods and services that are home-produced (McCallum, 1995; Lewis,

1999). HB constitutes an intangible barrier between countries that hampers deeper

trade integration. Despite its relevance, the roots of HB are not yet fully understood.

HB can be partly explained by physical barriers between countries such as transporta-

tion costs (Obstfeld and Rogoff, 2000), red tape restrictions, tariffs, duties and public

procurement (Heliwell, 1998; Fujiwara and Van Long, 2012) as well as exchange rate

risks (Adler and Dumas, 1983) and asymmetric information (Ahearne et al., 2004).

Nonetheless, many scholars acknowledge that there is a residual portion of HB that

still remains unexplained (Lewis, 1999; Bradford and Lawrence, 2002). A large part of

this unexplained component may depend on individuals’ embeddedness in a social

network. Recent studies suggest that the degree to which individuals are enmeshed in

a social network might affect trust and ultimately influence economic choices (Guiso

et al., 2006, 2009; Reggiani and Rossini, 2013). The literature also underlines that reli-

* Rossini: Department of Economics, University of Bologna, Strada Maggiore 45, 40125 Bologna, Italy.

Tel: +39-051-209-2607; Fax: +39-051-209-2664; E-mail: gianpaolo.rossini@unibo.it. Leroch: Department of

Economics, Martin Luther University, Halle, Germany. Reggiani: School of Social Sciences—Economics,

University of Manchester, Arthur Lewis Building, Manchester M13 9PL, UK. Zucchelli: Division of Health

Research (DHR), Lancaster University, Lancaster LA1 4YW, UK. We thank Vytas Bautrenas, Tim

Brown, Marius Bruelhart, Marco Casari, Francesca Cevolani, Georgios Marios Chrysanthou, Tom Coupé,

Caterina Degani, Vicente Donato, Oded Galor, Ken Green, Manfred Holler, Lehan Jin, Vesa Kanniainen,

Mariusz Krawczyk, Vikas Kumar, Siobhan McAndrew, Jacques Melitz, Hannu Nurmi, Olena Ognezdilova,

Yana Ponomarova, Romano Prodi, Larry Roberts, Remzi Sanver, Yevgeniya Shevtsova, Huasheng Song,

Yossi Spiegel, Monica Stagnaro, Satoko Takenoshita, Francesca Tolomei, Federico Trionfetti, Cecilia

Vergari, seminar participants at Heriott-Watt University, at ASREC 2011 in Arlington, VA and at EUREL

2012 in Manchester. We acknowledge support by the University of Bologna with the 2010 RFO scheme and

by DERS, University of York for Super Pump Priming 2010.

Review of Development Economics, 18(2), 401–414, 2014

DOI:10.1111/rode.12092

© 2014 John Wiley & Sons Ltd