Is culture a determinant of a jurisdiction’s comparative advantage? U.S. states that display a high level of generalized trust specialize in more “complex” industries that use contracts more intensively in their input-output relationships. This pattern is not driven by differences in states’ other observable characteristics or by unobservable time-varying industry- or state-specific factors, and it does not reflect selection by export destination. Theoretical considerations suggest that trust may be endogenous to the location of complex industries. An instrumental variable strategy that leverages the contemporary trust impact of historical racial discrimination confirms that trust factors into the comparative advantage of U.S. states.
José De Sousa : University Paris-Saclay, RITM.
Amélie Guillin : ERUDITE, UPEC.
Julie Lochard : ERUDITE, UPEC.
Arthur Silve : Department of Economics, Université Laval.
We thank Andrew Bernard, Matilde Bombardini, Carl Gaigné, Matthieu Crozet, Hartmut Egger, Keith Head, Miren Lafourcade, Claire Lelarge, Clément Nedoncelle, Sandra Poncet, Grégory Ponthière, Volker Nitsch, Andrew Rose, Farid Toubal, and seminar participants at British Columbia, Cologne (EEA), Darmstadt, INRA, Paris 1, Paris-Est Créteil, and Paris-Saclay for their helpful comments and insightful discussions. We are grateful to Thomas Michielsen for his help and his cooperation with the capital stocks data.