Culture & Growth

Summary

Assumptions

What determines culture?

  1. Religion
  2. Climate & Natural Resources
  3. Cultural homogeneity and social capital - homogeneity helps growth by social capital and stronger networks.
  4. Population density & social capability
  5. Government policy
  6. Income/capita & the economic environment
  7. Ethnic make-up
  8. Media/TV

Theory/Model

  • Ways culture matters: 
    1. Openness to new ideas
    2. Belief in the value of hard work
    3. Saving for the future
    4. Mutual trust - f(state, reputation).
      • Social capital - large social networks keep people accountable and higher trust feeds through to higher income/capita
    5. Social capability
      • peoples' experience of large-scale organisations
      • ability of residents to take advantage of market economics/specialization/trade
      • cause & effect over superstition or magic
      • life on earth > spiritual existence
  • Culture & Income/capita
    • Exogenous change in economic environment first leads to a shift B and then over time with a change in culture a shift to C.
    • This can lead to a positive multiplier effect.

 

Predictions

Evidence

  • Interestingly there is a negative relationship between belief in the value of hard work (versus leisure) and income/capita. However, it would be interesting to know if culture (with similar income/capita) is a good predictor of economic growth. Japanese in 1900 were deemed lazy and content. 
  • Studying immigrants to new countries found there was no correlation between the saving rate of an immigrant and the saving rate of the country they came from i.e. no relationship between culture and saving. Although immigrants are not a randomly selected group.
  • Law abidance has a cultural component (see p425 for parking tickets and culture).
  • Strong positive relationship between social capability and future economic growth (1960-2009)
  • A negative correlation between ethnic fractionalisation and gdp/capita, homogeneity is good - obviously may not be causal.
  • Strong relationship between population density in 1960 and growth rate in gdp/capita
  • Telenovas in Brazil were a significant contributor to the rapid reduction in Brazil's total fertility rate, from 5.8 children per woman in 1970 to 2.9 in 1991. 

Evaluation

  • Beware of observer bias - a country is successful therefore it must be because of its culture.
  • Cultural characteristics may be good at some times for growth and bad at other. 
  • How persistent are cultural traits? Do they last over multiple generations?