Social Openness and International Capital Flows

ABSTRACT We examine whether individual‐level social openness correlates with country‐level financial openness. We build indexes of social openness for close to 100 countries using principal component analysis of World Values Survey questions, and we test if these correlate with direct or portfolio capital flows. There is a statistically significant relationship between social openness and portfolio inflows and outflows, such that net portfolio flows are unaffected. This finding holds mostly for developed countries, with only weak evidence for developing ones, and it is robust to various measurement issues. There is also weak evidence that nations with greater social openness experience less volatile private and government consumption growth.