Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 29, 2021 erstellt
Description:
Using rich and novel datasets from China, we establish cultural fractionalization as a shaper of distrust and examine the effect of cultural fractionalization on the efficiency of financial intermediation. Instrumenting cultural fractionalization with geographic conditions, we document robust evidence that cultural fractionalization significantly lowers the efficiency of financial intermediation at the city level. Individual-level analysis shows that residents in cities with a lower level of cultural fractionalization exhibit greater trust in others, engage in more trusting behavior, obtain easier access to finance, and have better credit records. Furthermore, we find communication barriers and formal institutions unlikely to be the underlying channels through which cultural fractionalization causes the inefficiency of financial intermediation. Our analyses suggest that trust rooted in local cultures is an important determinant of the efficiency of financial intermediation