culture’and’economics’ · 2012. 10. 5. · figure 10 0.5 1 scale: total change 1558 to 1714 =...

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Culture and Economics Gerard Roland

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Page 1: Culture’and’Economics’ · 2012. 10. 5. · Figure 10 0.5 1 Scale: Total change 1558 to 1714 = 100 1.5 1603 1642 1688 1560 1580 1600 1620 1640 1660 1680 1700 1720 Yearly changes

Culture  and  Economics  

Gerard  Roland  

Page 2: Culture’and’Economics’ · 2012. 10. 5. · Figure 10 0.5 1 Scale: Total change 1558 to 1714 = 100 1.5 1603 1642 1688 1560 1580 1600 1620 1640 1660 1680 1700 1720 Yearly changes

Introduc4on  

•  Economists  have  tradi4onally  shied  away  from  introducing  culture  into  economics.  

•  View  that  culture  relates  to  preferences  and  that  economists  have  nothing  to  say  about  preference  forma4on  (leave  that  to  sociologists).    

•  The  primacy  of  economic  interests,  endowments,  incen4ves…  

•  Culture  difficult  to  define  and  to  measure.  •  View  that  culture  is  vague  explana4on  used  when  one  has  no  other  good  explana4on.  

•  In  the  past,  no  good  theore4cal  or  empirical  work  on  the  effect  of  culture  on  economic  outcomes.  

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Introduc4on.  •  Difficult  to  ignore  culture  as  there  is  cultural  varia4on  in  aJtudes  towards  thriK,  work  and  effort,  role  of  women,  openness  which  are  likely  to  affect  economic  performance.    

•  Nowadays,  economists  are  very  interested  by  culture.  There  has  been  pioneering  work  of  Greif  on  difference  between  Maghribi  and  Genoese  traders  in  the  late  middle  Ages  in  the  mediterranean.  

•  We  also  have  cross-­‐country  data  bases  measuring  culture,  making  interes4ng  empirical  research  possible.  

•  There  are  now  also  laboratory  experiments  on  culture.  

Page 4: Culture’and’Economics’ · 2012. 10. 5. · Figure 10 0.5 1 Scale: Total change 1558 to 1714 = 100 1.5 1603 1642 1688 1560 1580 1600 1620 1640 1660 1680 1700 1720 Yearly changes

Some  history  of  thought  •  Karl  Marx  (1818-­‐1883)  downplayed  role  of  culture  and  

considered  that  values  derived  from  economic  interest.  ThriK  is  in  interest  of  capitalism,  collec4vism  in  interest  of  workers.  Religion  in  interest  of  capitalists.  Chicago  school  has  similar  views  that  beliefs  determined  by  interests.  

•  Max  Weber  (1864-­‐1920)  put  Marx  on  his  head  and  saw  culture  as  driving  force  of  economic  change.  “The  Protestant  Ethic  and  the  Spirit  of  Capitalism”.  Protestan4sm  put  higher  emphasis  on  thriK  and  hard  work.    

•  Karl  Polanyi  (1886-­‐1964)  :  religion  and  moral  values  mi4gate  excesses  of  the  market  and  of  greed.    

•  Thornstein  Veblen  (1857-­‐1929)  :  culture  where  wealth  is  a  symbol  of  social  status  leads  to  conspicuous  consump4on.  Other  cultures  emphasize  knowledge  or  piety  or  courage  in  combat.  

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Plan  of  lecture  

•  What  is  culture?    •  Why  does  culture  maber?  Why  not  just  ins4tu4ons?  

•  How  to  measure  culture?  

•  Research  on  different  dimensions  of  culture  

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What  is  culture?  

•  The  set  of  values  and  beliefs  people  have  about  how  the  world  (both  nature  and  society)  works  as  well  as  the  norms  of  behavior  derived  from  that  set  of  values.    

•  Comprehensive  defini4on.  Close  to  religion  but  somewhat  more  inclusive.  Culture  evolves  somewhat  more  than  religion  

•  Not  culinary  or  clothing  habits.  

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Cultural  transmission  

•  Culture  is  mostly  transmibed  from  parents  to  children  but  also  via  peers  (Bisin  and  Verdier,  2000).  

•  Because  of  ver4cal  transmission,  lots  of  evidence  that  culture  is  slow-­‐moving.  

•  Much  of  the  literature  on  culture  exploits  the  different  countries  of  origins  of  migrants  to  the  US  as  well  as  the  4me  of  arrival.  

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Culture  and  ins4tu4ons  

•   North  (1990)  :  constraints  on  behavior  imposed  by  rules  of  the  game  in  society.  “Ins;tu;ons  include  any  form  of  constraint  that  human  beings  devise  to  shape  human  interac;on”.  

•   Includes  formal  and  informal  ins4tu4ons,  social  norms,  culture.  Very  broad  defini4on.  Does  not  make  sense  to  oppose  culture  and  ins4tu4ons.    

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Culture  and  ins4tu4ons.  

•  Dis4nc4on  made  in  Roland  (2004):  •  Slow-­‐Moving  ins-tu-ons:  ins4tu4ons  that  can  only  change  slowly  (when  they  change)  and  generally  change  con4nuously.  

•  Fast-­‐Moving  ins-tu-ons:  ins4tu4ons  that  can  change  very  rapidly  and  mostly  change  in  a  discon4nuous  way.  

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Culture  and  ins4tu4ons  

•  Poli4cal  ins4tu4ons  are  fast-­‐moving  ins4tu4ons:  revolu4ons,  democra4za4on…  though  fast  change  is  not  necessarily  the  rule.  Strong  discon4nuity  in  change.  

•  Social  norms  (and  culture  more  broadly)  are  slow-­‐moving  ins4tu4ons.    Some  norms  can  change  fast  but  not  the  culture  of  a  society  (basic  values,  world  view).  

•  Legal  ins4tu4ons  are  somewhat  in  between.  •  Slow-­‐moving  ins4tu4ons  can  influence  fast-­‐moving  ins4tu4ons.    

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Waves  of  migra4on  to  the  U.S.  

•  Fischer  (1989):  different  waves  of  seblers  introduced  different  ins4tu4ons  that  were  conform  to  their  cultural  values  and  beliefs.  

•  First  wave  (1629-­‐1641)  were  puritans  who  sebled  in  Massachussebs.  They  introduced  ins4tu4ons  adapted  to  their  beliefs  in  the  importance  of  educa4on  and  order:  universal  educa4on,  high  tax  rates,  large  size  of  government,  swiK  jus4ce,  town  mee4ngs…  

•  Second  wave  (1642-­‐1675)  were  Cavaliers  who  migrated  to  Virginia  mo4vated  by  primogeniture  in  order  to  find  estates.  They  believed  that  inequality  was  natural  and  adopted  different  ins4tu4ons:  low  educa4on  and  taxes,  lack  of  formal  jus4ce…  

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Waves  of  migra4on  to  the  U.S.  

•  Third  wave  were  Quakers  (1675-­‐1725)  who  sebled  in  Delaware.  Culture  of  high  priority  to  personal  freedom.  Introduced  limited  government,  equal  rights,  less  harsh  jus4ce.  

•  Fourth  wave  were  ScoJsh-­‐Irish  (1717-­‐1775):  believed  in  freedom  from  the  law  and  right  to  armed  resistance.  Led  to  limited  government  and  vigilante  jus4ce.    

•  Overall,  ins4tu4ons  were  endogenous  to  culture.

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Murrell  and  Schmidt  (2012)  

•  Evidence  that  “whig”  culture  predated  the  Glorious  revolu4on  of  1688.    

•  Poli4cal  change  affected  by  cultural  change  and  not  vice  versa.  

•  Poli4cal  and  legal  changes  came  later.  

•  There  is  other  empirical  evidence  of  the  causal  effect  of  culture  on  ins4tu4ons.  

Page 14: Culture’and’Economics’ · 2012. 10. 5. · Figure 10 0.5 1 Scale: Total change 1558 to 1714 = 100 1.5 1603 1642 1688 1560 1580 1600 1620 1640 1660 1680 1700 1720 Yearly changes

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How  to  measure  culture?  

•  World  values  survey.  Mul4-­‐year  survey  on  values  in  increasing  number  of  countries.    

•  Most  well  known  and  used.  •  Over  a  quarter  million  respondents  worldwide.  •  Nearly  a  thousand  ques4ons.  Ques4ons  on  values  

about:  life,  family  and  society;  the  environment;  work;  the  importance  of  tradi4onalism;  gender  roles;  democracy  and  government;  health;  educa4on;  religion,  spirituality  and  morality;  honesty…  

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Schwartz  and  value  types.  

•  Searches  for  core  set  of  values  with  common  cross-­‐cultural  meaning  that  can  be  used  as  a  basis  to  compare  culture  across  countries.      

•  Gathered  between  1998  and  2000  samples  of  K-­‐12  schoolteachers  and  college  students:  195  samples  drawn  from  67  na4ons  and  70  cultural  groups,  each  sample  generally  consis4ng  of  180-­‐280  respondents  for  a  total  of  over  75,000  surveys.    

•  Looks  at  values  that  are  guiding  principle  in  life.  

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Individualism  and  collec4vism  

•  Individualis4c  culture  emphasizes  individual  achievement  (standing  out)  and  awards  social  status  to  success  in  individual  achievement,  be  it  economic,  ar4s4c,  scien4fic,  humanitarian,…  

•  Collec4vist  culture  emphasizes  conformity  and  embeddedness  in  larger  groups  and  frowns  on  devia4on  from  conformity.    (see  e.g.  Plabeau  2000;  Baland  et  al.  2007,  Comola  and  Fafchamps,  2010;  Jakiela  and  Ozier,  2011;  )  

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Interna4onal  Measurement  of  Individualism-­‐Collec4vism  

•  Hofstede’s  (2001)  measure  of  individualism  versus  collec4vism.  Ini4ally  based  on  surveys  among  IBM  employees  across  the  world  to  understand  cultural  differences  within  a  corpora4on.  Was  generalized  to  76  countries  later  on.  Based  on  factor  analysis  of  survey  ques4ons.    Loads  posi4vely  on  valuing  individual  freedom,  opportunity,  achievement,  advancement,  recogni4on  and  nega4vely  on  valuing  harmony,  coopera4on,  rela4ons  with  superiors.  Measure  validated  by  other  studies  on  smaller  samples.  

•  Schwartz  cultural  mappings  with  dimensions  of  intellectual  and  affec4ve  autonomy  opposing  embeddedness  have  high  correla4on  with  Hofstede  data.    

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Individualism  (Hofstede)  

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Research  on  culture  

•  Impossible  to  men4on  all  research  on  culture.  •  Just  give  a  few  examples.    

•  Literature  emphasizes  role  of  trust  and  civicness  on  one  hand,  individualism  and  collec4vism  on  the  other  hand.  

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Culture  of  “honour”  in  US  South  

•  More  aggressive  behavior  in  US  South  related  to  different  sources  of  migra4on.  

•  Migrants  in  Northern  US  more  from  farming  origin,  migrants  in  Southern  US  more  from  herders  (ScoJsh-­‐Irish).  Cable  is  more  easily  stolen  than  land  and  cable-­‐herders  had  to  develop  aggressive  behavior  to  defend  themselves  against  thieves.  Reinforces  by  presence  of  weak  states.  

•  Cohen  and  Nisbeb(2000)  did  lab  experiments  on  males  from  North  and  South  and  found  differences  in  agressiveness  (testosterone).    

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Culture  of  “honour”  in  US  South  

•  Grosjean  (2011)  found  that  coun4es  in  US  South  with  more  ScoJsh-­‐Irish  Immigra4on  prior  to  1790  have  higher  rates  of  homicide  today.  

•  This  pabern  does  not  exist  in  coun4es  where  ScoJsh-­‐Irish  were  in  minority  (effect  of  horizontal  cultural  transmission).  

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Civic  culture  and  ins4tu4ons.  •  Complementari4es  between  culture  and  poli4cal  ins4tu4ons  (Tocqueville).  

•  Putnam  (1993)  on  Italy.  Same  formal  poli4cal  ins4tu4ons  but  different  cultural  norms  in  North  and  South  and  different  civic  tradi4ons.    

•  Regions  in  the  South  had  much  higher  instability  (i.e.  turnover)  of  regional  governments,  more  delay  in  budget  approval,  worse  sta4s4cal  apparatus,  a  lower  quality  of  legisla4on  and  lower  provision  of  public  goods.    

•  Ex.:  For  same  funding  of  daycare  program,  Emilia  Romagna  in  the  North  had  set  up  a  day  care  center  for  every  400  children  whereas  Campania  in  the  South  had  only  one  center  for  every  12,560  children.    

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City-­‐states  and  the  development  of  civic  culture.  

•  Different  histories  of  the  North  and  the  South  of  Italy.  The  South  has  known  for  more  than  a  thousand  years  a  feudal  autocra4c  rule  of  aristocra4c  landlords.  

•  The  towns  of  Northern  Italy  developed  into  vigorous  city-­‐states  which  were  self-­‐governed.  Ac4ve  associa4ons  like  the  guilds  were  very  influen4al  in  the  life  of  these  city-­‐states.    

•  In  the  twelKh  century,  there  was  not  really  a  development  gap  between  the  North  and  the  South  and  the  North  was  not  really  richer  than  the  South.  It  only  became  richer  on  the  basis  of  the  development  of  the  city-­‐states.    

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Culture  and  ins4tu4ons  

•  Licht,  Goldschmidt  and  Schwartz  (2007)  exploit  gramma4cal  differences  (whether  or  not  a  pronoun  “I”,  “You”)  can  be  dropped  in  a  sentence  correlated  with  embeddedness  versus  autonomy.    

•  High  score  on  the  embeddedness  variable  (instrumented  by  pronoun  frop)  leads  to  lower  scores  on:    

•  1)  the  rule  of  law,      •  2)  “non  corrup4on”  and    •  3)  democra4c  accountability  

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Tabellini  2008  

•  Tabellini  linked  the  work  of  Licht  et  al.  and  of  Putnam  by  emphasizing  the  rela4onship  between  trust  and  civic  culture.    

•  Found  that  countries  where  there  is  more  trust  and  respect  have  beber  ins4tu4ons  

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Psychological  founda4ons  of  individualism-­‐collec4vism  cleavage  

•  Trust  is  related  to  embeddedness  and  individualism-­‐collec4vism.  

•  Cultural  psychology  finds  that  the  most  relevant  cultural  cleavage  seems  to  be  the  individualism-­‐collec4vism  cleavage  (see  also  Klasing,  2012)  

•  Why  does  the  individualism-­‐collec4vism  cultural  cleavage  seem  so  important  rela4vely  to  other  cultural  variables?  

•  Huge  literature  in  cultural  psychology  documen4ng  these  differences,  their  origins  and  implica4ons.  

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Differences  in  Percep4on  of  self  

•  Percep4on  of  Self  is  fundamental  to  human  behavior  and  is  rooted  in  interac4ons  with  others  and  seizing  of  meanings  from  different  cultural  environments.  

•  Markus  and  Kitayama  (1991):  independent  vs  interdependent  self.  

•  Independent  self:  self  derives  its  iden4ty  only  from  inner  abributes  of  individual.  These  abributes  are  considered  to  reflect  the  essence  of  individual,  to  be  stable  across  4me  and  context,    and  their  combina4on  is  seen  as  unique  to  the  individual.    

•  Individual  inner  abributes  significant  for  genera4ng  and  predic4ng  behavior.      

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Differences  in  Percep4on  of  self  

•  Interdependent  self:  self  derives  iden4ty  essen4ally  from  rela4ons  with  others.  Self  is  not  separate  iden4ty  but  embedded  in  larger  social  group.    

•   Individual  behavior  derived  from  role  in  different  social  contexts  and  percep4on  of  others’  reac4on  to  their  behavior  as  well  as  effect  of  own’s  ac4ons  on  others.    

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Differences  in  Percep4on  of  self  

•  In  surveys,  individuals  from  individualis4c  countries  (US,  UK,  Australia,  Canada,  Sweden,  …)  describe  themselves  through  statements  about  inner  psychological  characteris4cs,  personality  traits,  abili4es.  

•  Individuals  from  collec4vist  cultures    (  Africa,  Malaysians,  East  Asians)  describe  themselves  through  rela4onal  roles  in  society.  

•  Differences  in  self-­‐percep4on  have  many  implica4ons.    

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Differences  in  Self-­‐knowledge    

•  Independent  Self:  search  to  know  oneself  through  inner  search.  

•  Interdependent  Self:  Know  how  one  is  being  evaluated  by  others.  Constant  “objec4ve  self-­‐awareness”  rela4ve  to  individualis4c  culture..  

•  Example:  North  Americans  students  less  likely  to  cheat  on  a  test  when  a  mirror  was  present  and  were  more  self-­‐cri4cal.  No  effect  of  mirror  on  Japanese  students.  

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Difference  in  Consistency  of  Self  •  Independent  self  emphasizes  self-­‐consistency  at  the  cost  of  rigidity.  Important  for  self-­‐esteem.  

•  Interdependent  self  emphasizes  as  important  to  self-­‐esteem  adjustment  to  contexts  and  flexibility  at  the  cost  of  consistency.  

•  Example:  Japanese  (but  not  American)  self-­‐descrip4ons  dependent  on  who  was  in  the  room,  are  more  self-­‐cri4cal  when  in  presence  of  professor.  Koreans  change  self-­‐descrip4on  depending  on  situa4on  but  not  Americans  (with  parents,  roman4c  partner,  professor,  friends,  ..).      

•  East  Asians  more  ready  to  endorse  contradictory  views  of  their  personality  (introverted  and  extraverted)  as  well  as  more  contradictory  beliefs  about  reality  (dialec4cs).  

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Example:  aben4on  to  field  and  object  

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Rule-­‐based  versus  associa4ve  thinking  

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Other  cogni4ve  differences  

•  Noun  bias  in  individualis4c  cultures.  •  Fundamental  abribu4on  error  present  in  individualist  cultures:  explain  behavior  too  much  by  someone’s  intrinsic  abributes  rather  than  by  situa4on.    Not  present  in  collec4vist  cultures  where  situa4on  is  taken  more  into  account  than  disposi4ons  of  individual.  

•  People  from  individualis4c  cultures  pay  more  aben4on  to  literal  explicit  meaning  of  words,  people  from  more  collec4vist  cultures  pay  aben4on  to  implicit  meaning  as  well  (tone,  body  language).    

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Differences  in  effort  

•  Independent  self:  abributes  of  individual  do  not  vary.    •  Interdependent  self:    individual  is  more  malleable  and  can  improve  through  effort.    

•  In  collec4vist  cultures,    response  to  failure  is  more  effort  (say  more  remedial  courses  in  learning).  View  of  achievements  as  related  to  effort  more  than  ability.  In  experiments,  individuals  can  be  manipulated  to  think  that  abili4es  are  important  for  task.  

•  In  individualis4c  cultures,  response  to  failure  is  to  look  for  alterna4ve  task  beber  suited  to  one’s  innate  talents.  More  emphasis  on  differences  in  ability  than  effort.  In  experiments,  individuals  can  be  manipulated  to  think  that  effort  is  important  for  task.  

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Differences  in  mo4va4on  to  fit  in  or  s4ck  out.  

•  People  from  more  collec4vist  cultures  have  stronger  mo4va4on  to  fit  in  than  those  from  individualis4c  cultures  whereas  the  laber  prefer  to  s4ck  out.  

•  When  given  a  choice  of  pens,  European-­‐Americans  more  likely  to  choose  minority-­‐colored  pen  and  Asian-­‐Americans  more  likely  to  choose  majority-­‐colored  pen.  When  presented  array  of  shapes,  European-­‐Americans  rate  more  highly  unusual  shape  than  East  Asians.  

•  Adver4sements  targe4ng  East  Asians  more  likely  to  emphasize  connec4on  with  others  whereas  adver4sements  targe4ng  American  middle  class  consumers  more  likely  to  emphasize  uniqueness.  

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Differences  in  choice-­‐making  

•  Independent  self  emphasizes  autonomy  of  choice,  interdependent  self  is  more  concerned  with  goal  groups  and  is  more  willing  to  adjust  behavior  for  beber  coordina4on  of  group.  

•  In  collec4vist  cultures,  choice  of  spouse  or  job  made  more  oKen  by  family  than  in  individualis4c  cultures.    

•  Asian-­‐American  children  prefer  tasks  chosen  by  members  of  close  community  (ingroup)  whereas  European-­‐American  children  prefer  tasks  chosen  by  themselves.  

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Differences  in  rela4onships:  ingroups  and  outgroups.  

•  Independent  self:  behavior  remains  much  the  same  in  contacts  with  everyone.    

•  Interdependent  self:  behavior  different  with  important,  privileged  rela4onships  (ingroup)  than  with  others  (outgroup).  

•  European-­‐Americans  react  in  the  same  (nega4ve)  way  when  choices  were  made  for  them  whereas  Asian-­‐  Americans  react  nega4vely  only  when  a  stranger  makes  the  choice.    

•  Less  free-­‐riding  among  Chinese  and  Israelis  when  with  ingroup  than  outgroup,  no  difference  among  Americans.  

•  People  from  collec4vist  culture  show  more  conformity  with  ingroup.  

•  This  difference  leads  to  more  generalized  trust  in  individualis4c  cultures.  

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 Differences  in  rela4onal  mobility    

•  Individualis4c  cultures:  high  rela4onal  mobility.  Rela4onships  formed,  maintained  or  dissolved  if  mutually  beneficial.  Exis4ng  rela4onships  are  by  defini4on  rewarding.  

•  Collec4vist  cultures:  lower  rela4onal  mobility.  One  is  born  in  fixed  rela4onal  network  and  joins  less  new  interpersonal  networks.    Exis4ng  rela4onships  are  less  rewarding.  

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Individualism,  innova4on  and  growth.  

•  Gorodnichenko  and  Roland  (2010):  endogenous  growth  model  where  individualism  gives  social  status  benefit  to  innova4on  on  top  of  monetary  benefit  and  collec4vism  has  efficiency  advantage  in    coordina4on.  In  equilibrium,  the  laber  has  no  growth  effect,  only  a  level  effect  whereas  the  former  has  a  growth  effect.    

•  Empirical  evidence  confirms  a  causal  effect  from  individualism  to  measures  of  long  run  growth  and  innova4on.    

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Econometric  model  

Yi : measure of growth or innovation Indi : measure of individualism Xi : control variable

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Empirical  iden4fica4on  •  Individualist  culture  is  likely  to  be  endogenous  to  economic  outcomes.  Measures  of  individualism  instrumented  by  the  difference  in  frequency  of  blood  groups  in  different  popula4ons  rela4ve  to  the  US  (or  UK).    This  variable  can  be  argued  to  sa4sfy  the  exclusion  restric4on  since  these  are  neutral  gene4c  markers  having  no  direct  effect  on  gene4c  fitness.  

•  Why  may  it  be  a  valid  instrument?  Culture  like  genes  is  transmibed  from  parents  to  children  (see  Bisin  and  Verdier,  2000,  2001).  Gene4c  measures  can  be  seen  as  proxies  for  cultural  transmission  across  genera4ons.  People  who  are  gene4cally  closer  are  also  likely  to  be  culturally  closer.    

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Conclusions  •  There  are  solid  founda4ons  in  cultural  psychology  to  the  individualism-­‐collec4vism  cleavage  being  one  of  the  major  cross-­‐cultural  differences  

•  Theory  predicts  individualism  has  dynamic  advantage  in  innova4on  and  collec4vism  compara4ve  advantage  in  coordina4on  

•  Causal  evidence  suppor4ve  of  the  theory.  •  Need  to  understand  more  the  past  and  culture  to  understand  cultural  obstacles  to  development.    

•  Importance  of  culture  does  not  imply  fatalis4c  aJtude  towards  development.    

•  Cultural  imperialism  does  not  work.  Countries  must  find  legal  and  poli4cal  ins4tu4ons  that  are  suited  to  their  culture.  

•  Danger  of  value  judgments  in  research  on  culture.  There  is  a  lot  to  cri4cize  in  cultures  of  developed  countries  and  a  lot  to  learn  from  cultures  of  less  developed  countries.