Culture, Institutions and the Wealth of Nations / Yuriy Gorodnichenko, Gerard Roland.

Format:

Book

Author/Creator:

Gorodnichenko, Yuriy.

Contributor:

National Bureau of Economic Research.

Roland, Gerard.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16368.

NBER working paper series no. w16368

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We construct an endogenous growth model that includes a cultural variable along the dimension of individualism-collectivism. The model predicts that more individualism leads to more innovation because of the social rewards associated with innovation in an individualist culture. This cultural effect may offset the negative effects of bad institutions on growth. Collectivism leads to efficiency gains relative to individualism, but these gains are static, unlike the dynamic effect of individualism on growth through innovation. Using genetic data as instruments for culture we provide strong evidence of a causal effect of individualism on income per worker and total factor productivity as well as on innovation. The baseline genetic markers we use are interpreted as proxies for cultural transmission but others have a direct effect on individualism and collectivism, in line with recent advances in biology and neuro-science. The effect of culture on long-run growth remains very robust even after controlling for the effect of institutions and other factors. We also provide evidence of a two-way causal effect between culture and institutions.

Notes:

Print version record

September 2010.