Culture and Economic Development

Eelke de Jong, Radboud University, Nijmegen, The Netherlands

2015 Elsevier Ltd. All rights reserved.
This article is a revision of the previous edition article by F. Fukuyama, volume 5, pp. 31303134, 2001, Elsevier Ltd.

Abstract

Both historical studies and econometric analyses nd that high levels of economic growth are associated with values such as
achievement motivation, future orientation, and eagerness to learn. Opinions differ with respect to the direction of the causal
relation, if any, and the role of formal institutions. Some regard formal institutions as of more importance than values. Future
research should focus on the time pattern of changes in values, institutions, and economic performance and take a close look
at the inuence of power.

Introduction so-called Asian values such as group spirit, mutual assistance,

Max Webers the Protestant Ethic and the Spirit of Capitalism is
regarded by many as the classical work on the relation between
religion and economic development. Often the implicit
suggestion is that it forms the start of research on the relation
between culture in the sense of norms and values and
economic growth. In fact, it marks the start of a period in which
economic research began to ignore culture. From the time of
Adam Smith, who is considered to be the founder of the
economic science, until the beginning of the twentieth century,
culture was part of economic science, although it was not often
explicitly mentioned as such. Webers work can be seen as the
study, which made culture more explicit. From then onward
culture was part of anthropology and sociology, and economics
developed into a study of human beings optimizing their
objective function under the constraints of available resources.
After World War II, the discipline was dominated by mathe-
matical and econometric approaches. These quantitative studies
left no room for vague concepts such as culture. The subelds of
development economics and international business remained
exceptions in that they still paid attention to culture.
The dominant postWorld War II model of economic
growth has capital and labor as inputs. Only the quantities of
these production factors matter. Later models of economic
growth also take the quality of these inputs into account. In
particular the quality of labor can be different between coun-
tries depending on the quality of the countries educational
system. This opens the possibility of including as explanatory
variables the quality of the educational system and of national
institutions. Recently, this has lead to models including culture
as one of the determining factors of growth.
The factors that lead to a reemergence of culture in economics
can be divided into two groups: developments in the economy
and a disappointment with the results of the mathematical
models. In the beginning of the 1990s, it became clear that from
1960 onward, some East Asian countries had shown high levels
of economic growth. Many were surprised by the success of these
newly industrialized countries (NICs). These countries (Taiwan,
South Korea, Hong Kong, Singapore, and Malaysia) were not
those which in the mid-1950s were mentioned as candidates for
success. This unexpected success of the NICs triggered a debate
on the Asian Miracle, which ended in the conclusion that
and thrift were conducive for economic growth (see the liter-
ature referred in Khoo Boo Teik, 1999; Chong, 2002).
The fall of the Iron Curtain in 1998 was another event that
set off a discussion on the relevance of values for economic
growth (Blanchard et al., 1994; Murrell, 1995). The discussion
concentrated on the best tactic to introduce a market economy
in the former centrally planned economies. Neo-classical
economists advised a shock therapy by which free market
institutions would be introduced as soon as possible (the
authors in the edited volume Blanchard et al., 1994). Others
(Murrell, 1995), however, plead for a gradual approach. In
their view, the years under communism had led to a culture in
which citizens expect the state to take care of and decide on
many aspects of life; thus it would take time for the inhabitants
of these countries to change their attitude toward a more active
stance and to take more responsibility for their own life.
In addition to economic development, developments in
economic theory also led to an interest in culture. General
equilibrium theory was able to demonstrate that in competitive
markets the general equilibrium equations had some solutions.
However, it proved to be impossible to show that there is just
one (unique) solution toward which the economy converges.
Other approaches made unrealistic assumptions in order to
obtain any solution. Rational expectation models form an
example of such an approach. In these models, economic agents
are assumed to foresee developments into the far future and
select the one and only path that leads to the stable equilibrium.
These unsatisfactory results and assumptions gave rise to an
interest among economists in alternative theories and concepts,
such as bounded rationality, institutions, and culture in the sense
of norms and values. The interest in culture was also stimulated
by the fact that databases of cultural dimensions (Hofstede,
2001; Schwartz, 1994), and measures of peoples values across
the world (European Values Survey and World Values Survey)
became available, so that empirical studies on the relationship
between values and economic phenomena became possible.
Three Phases of Economic Development
Three phases of economic development provide insight
into the relationship between culture and economic change

528 International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 5 http://dx.doi.org/10.1016/B978-0-08-097086-8.64002-3

(Marini, 2004). Marini has dened these phases on the basis of
matching ndings of socio-psychological research with the
literature on the role of culture for economic growth. Each
phase is characterized by a particular level of economic growth,
income per capita, and values. The preindustrial or antiquity is
the rst phase. In this phase, income per capita is low and
economic growth is almost absent. Extended families and
communities are buffers against economic hardship, which
correspond with communitarianism and collectivism. The lack
of sight on any progress leads to fatalism and an orientation on
the past instead of the future. Industrialization is the next
phase. During this period, economic growth is high and income
per capita increases sharply. Economic growth is stimulated by
technical progress and high levels of savings. Success in
economic terms is rewarded to the individual, and the high
levels of growth enable relatively large groups to escape from
poverty. Associated with these events are an orientation on the
future, achievement motivation, and an appreciation of hard
work and materialism. The third and nal stage is the post-
modern or postindustrial period. It is characterized by high
income per capita and relatively modest levels of economic
growth. In principle, the entire population can take survival for
granted. With it goes a change in dominant values. Self-
expression and quality of life become more important than
materialism and physical security. These values are in high
esteem after people have attained material security, and because
they have attained material security (Inglehart, 1997: p. 35).
Figure 1 summarizes the three phases inspired by the ideas
of new institutional economics, which is an economic
perspective that extends economics by including social and
legal norms and values. In this mode, economic performance is
determined by culture, formal institutions (written laws), and
governance. The latter refers to the way members of a society
Culture Institutions
Values Laws, formal rules
Collectivism
Fatalism
Future orientation
Achievement motivation
Self expression
Individualism
Figure 1 Values, institutions, growth, and income per capita. Source: Adapted from De Jong, Eelke, 2009. Culture and Economic: On Values,
Economics and International Relations. Routledge, London (Figure 7.1).
Culture and Economic Development 529
normally treat each other without using the formal institutions
of court and law: whether one seeks consensus or wants to ght
out conicts. The columns of institutions and governance are
empty; we come to that at the end of this contribution.
Economic development is understood as the transition
period from the preindustrial (often agrarian) stage to indus-
trial society. The important question is then whether and how
culture stimulates or hampers this transition. A related issue is
whether it is culture or the formal institutions that are primarily
responsible for this transition. These questions have been
studied by means of historical and anthropological, in-depth
analyses and cross-country regression analysis.
Historical and In-Depth Case Studies
Historical and in-depth studies range from covering a short time
period or more than a millennium. Baneld (1958) is a good
example of the former. His work describes in detail the society of
a small poor village in southern Italy in the 1950s. A culture
focused on the interests of the nuclear family is unable to orga-
nize activities for the collectivity, even though the latter would
benet all. Anxiety, suspicion, and hate make cooperation
burdensome. Baneld regards the regions isolation, its high
death rate, and the related fear of orphanage and neglect as
important determining factors for this self-interest. It is a good
description of what is meant by a backward society and how
dominant values seem to consolidate the status quo. At the end of
the book, Baneld suggests that some innovations such as formal
education and apprenticeships may disrupt the status quo.
In contrast, the role of culture in supporting economic
change is illustrated in the studies collected in Harrison and
Berger (2006). For example, in a Nigerian town the traditional
Governance Resource
Allocation
Play of the game Growth Income
Low Low
High Increasing
Low High
530 Culture and Economic Development
habit was to have many children because a prosperous
community was thought of as one with many people. These
children were raised by the community. Formal education
according to Western standards changed the attitude of young
townspeople. They thought fostering as exploitative and as
detrimental to the development of the children. Literacy and
basic math competence taught in school enabled people to
communicate with governments ofcials. The study on Japan
(Kunio, 2006) in the Harrison and Bergers book illustrates
the importance of culture for the change from a period of
growth to that of an afuent society. According to Kunio,
Japanese rms nd it difcult to change from the community individualism and those of Gregory VII lead to a bureaucratic
oriented progrowth strategy to one, which leaves more room for
the individual (p. 98). Moreover, Japan is nding it difcult to
reduce the governments involvement in the economy.
Historical studies covering a millennium or even a longer
time period and a wide range of countries can disentangle the
various factors that during several periods have contributed to
development and stagnation. An important question dealt with
in this type of studies is: why was it that European countries
were so successful in the sixteenth and seventeenth century and
why not China and countries in the Middle East? At the
beginning of the Christian era, the worlds scientic center was
in the Middle East. Many of the techniques developed by the
Europeans during the Industrial Revolution were known to the
Chinese. For example, in the thirteenth century China had
a power driven spinning machine, whereas in England such
a machine was invented about 500 years later. Similarly, by the
later eleventh century China knew how to use coal in blast
furnaces for smelting iron. About 700 years later, this invention
came in Britain, while in the mean time coal smelting had
fallen into disuse in China (Landes, 2006: p. 6). Moreover, in
the fteenth century, China had implemented a policy of
closure, which meant an abandonment of a program of great
voyages. Landes (1998) ascribes the Chinese failure of making
a commercial success of existing techniques and their decision
to stop exploring the oceans to a lack of curiosity. The Chinese
went to show themselves, not to see and learn. . They were
what they were and did not have to change (Landes, 1998:
p. 96). Success was there for those who were open for foreign
inuences and ideas, and were eager to learn. Moreover, indi-
viduals should have the freedom to experiment and be rewar-
ded for their efforts; freedom rst, economy later; because
freedom is a necessary if not sufcient condition of develop-
ment (Landes, 1998: p. 432).
The importance of freedom for economic development is
underscored by Lal (1998), who ascribes a large role to indi-
vidualism, which distinguished Europe from more ancient
civilizations in Asia and the Middle East. This individualism
stresses the nuclear family and romantic love instead of the
traditional extended household. The move toward individu-
alism was the unintended consequence of measures taken by
popes in the sixth and tenth centuries. In the sixth century,
Pope Gregory I forbade marriage to close kin, close afnes or
the widows of close kin, concubinage, and the transfer of
children by adoption (Lal, 1998: p. 83). Al these four practices
can be regarded as strategies of heirship such as ensuring the
inheritance of family property and of the provision of a heir. By
forbidding these practices the pope inhibited a family from
retaining its property and stimulated its isolation. As
a consequence, chances would increase that the church would
obtain the property. From the tenth century onward, the
enormous accumulation of property by the church raised
opposition from within and outside. In 1075, Pope Gregory VII
reacted by enforcing the celibacy of the clergy and the extension
of the prohibitions to marry, measures which secured the
churchs ability to secure its property. Moreover, he declared
the supremacy of the pope over the church and over secular
matters, and the independence of the clergy from secular
control. Excommunication was the popes instrument for
enforcing his will. The measures of pope Gregory I enhanced
apparatus, such as a professional judiciary and a treasury
needed for making the legal system work. These developments
created the institutions of a market economy, which led to high
levels of growth in later centuries.
However, institutions established in previous centuries
can also hamper economic growth in later periods, as is
illustrated by Kuran (2011). He argues that Islamic law and
in particular its inheritance law has held back the Middle
East. The Islamic inheritance system had very egalitarian
rules, which gave women nancial security and dampened
wealth inequalities. However, combined with the possibility
of polygamy it also precluded that a fortune could be
inherited by a few successors. Consequently, large rms
could not be established. The only means of accumulating
wealth was the waqf, a form of trust. A waqf allowed the use
of the return on assets for providing services in perpetuity.
However, a waqf could not easily change its goals so that it
meant a transfer of money from exible commercial use to
an inexible charitable one. The degree of exibility depen-
ded on the willingness of the local imam. Finally, Islamic
contract law lacked any entity shielding, so that a partnership
had to be dissolved on if any member or third parties asked
for it. The death of a partner terminated the partnership
automatically and gave claims to his heirs at the costs of the
other partners. All these characteristics of Islamic law
precluded the existence of independent, long-lasting large
commercial rms. Consequently, trade and other economic
activities remained small and were formalized in short-lived
partnerships. Laws were changed when in the nineteenth
century the disadvantages became too obvious; the Christian
and Jewish traders became very rich compared to their
Islamic counter partners. However, over the centuries, regu-
lation had stimulated corruption, reduced mutual trust, and
undermined civil organizations.
In principle, a historical analysis over a long period
enables one to disentangle the causal effects between culture
and economic growth. However, it is very difcult to obtain
reliable information on dominant values for periods in the
distant past, let alone their exact timing. This lack of infor-
mation hampers studies on the relationship between values
and economic performance, in particular when one is inter-
ested in the causal direction. As a result, in the end the nd-
ings of these historical studies depend to a high degree on the
researchers ability to disentangle the different aspects from
the abundance of information provided. The above summary
of Lals study of the Western success and Kurans investigation
of the Middle Easts failure illustrate the subjectivity of these
studies. Lal tends to emphasize values more than Kuran does.

A way to circumvent this high level of subjectivity might be
provided by quantitative studies.
Cross-Country Quantitative Studies
During recent decades, quantitative information has become
available on dominant values in a wide range of countries. In
1980 Hofstede was the rst to publish national cultural
dimensions for a large set of countries. Later initiatives include
the dimensions developed by the Israeli psychologist Shalom H.
Schwartz, the World Values Survey, the European Values Survey,
and the Global Leadership and Organizational Behavior Effec-
tiveness research program (for a review see Appendix 1 in De
Jong, 2009). These data sets allow for assessing the role of
culture through cross-country regressions, in which growth in
per capita income is the dependent variable and culture is
among the set of explanatory variables. The latter includes
income per capita at the beginning of the period. Its expected
coefcient is negative; countries that have relatively low income
per capita at the beginning of the period are expected to grow
faster over the subsequent period and thus their income
converges to that of the richer countries. The other explanatory
variables can be derived from the literature on economic growth.
Several variables are suggested as proxies for culture.
Inspired by, among others, the work of Putnam et al. (1993),
some studies have used trust for explaining economic growth
and income per capita. Trust is measured as the percentage of
respondents in each country that replied most people can be
trusted when asked generally speaking, would you say most
people can be trusted, or that you cannot be too careful in
dealing with people?. Trust appears to be positively associated
with annual growth of income per capita (Knack and Keefer,
1997; Zak and Knack, 2001). The argument is that people
who trust each other dont have to rely on costly institutions
that ensure the execution of the counterpartys obligation. As
a consequence, high trust leads to a more efcient society and
growth. Beugelsdijk (2006) argues that this is an argument
based on a microlevel concept of trust, whereas the trust
question refers to the macrolevel, where it is related to the
functioning of the bureaucratic system. People trust each other
because they know that in case of misbehavior they can rely on
courts to defend their rights. A principle components analysis
nds trust in a component with measures of institutional
strength. In conclusion, the trust variable seems to measure
both values and the quality of institutions.
Strong desires to achieve on the part of at least some people
are considered by McClelland (1961) as the cultural factor
contributing to economic growth. During other phases of
economic development, values as obedience and quality of life
are regarded as more important (see Figure 1). Granato et al.
(1996) and Marini (2004) construct a cultural index repre-
senting each of these stages by means of the answers given in
the World Values Survey when respondents were asked to
mention ve qualities they teach their children out of a list of
11 items. Qualities are for example obedience, independence,
thrift, and hard work. Both studies nd a positive inuence on
economic growth for cultural indices of achievement motiva-
tion vs obedience. Williamson and Mathers (2011) use
a similar procedure and explicitly confront the proxies of
Culture and Economic Development 531
culture with those of formal institutions. They nd that both
types of proxies have a positive inuence on economic growth.
However, institutions enhancing economic freedom appear to
be more important and more often signicant for explaining
economic growth than proxies of culture.
Another group of authors is inspired by Webers hypothesis
that religion is an important explanatory variable for economic
growth (e.g., Grier, 1997; Noland, 2005; Barro and McCleary,
2003). Two types of variables are used. The rst type
measures whether respondents belong to a particular religion.
Grier (1997) nds that in a group of 63 former colonies,
protestantism is positively and signicantly related to real
(gross domestic product) GDP growth and GDP per capita is
higher, the higher the percentage of protestants in countries. In
a similar vein, Noland (2005) studies the inuence of religious
afliation on per capita economic growth and on total factor
productivity. He nds that Islam is not a drag on growth. In
some studies the answers on aspects of belief are representing
religion. Barro and McCleary (2003) use the answers on
questions about respondents beliefs in afterlife, heaven, and
hell. They nd that in particular belief in hell is positively
correlated with economic growth, even if they included
monthly church attendance as a representation of the costs
associated with acquiring theses beliefs.
Individualism vs Collectivism is an important if not the
most important cultural dimension. igdem Kagitibasi (1994:
p. 52) even labels the 1980s the decade of I/C. Individualism
is often found to be advantageous for innovation. The
production process of newly innovated products needs coor-
dination, which Gorodnichenko and Roland (2011) assume to
be more easily be arrived at in collectivistic societies, such as
many Latin-American countries and countries in Asia (Indo-
nesia, South Korea, and Taiwan). Their model of this trade-off
between the innovational advantages of individualism and the
production advantages of collectivism, also assumes that the
social status reward for developing a better technology is
positively associated with individualism. In their empirical
part they nd that output per capita is positively related to
individualism. This relation is robust for including institutions
and other measures of culture.
A cross-country regression analysis delivers the factors that
explain the relative position of a country in a group. This
implies that the results depend on the countries selected for the
analysis. Beugelsdijk (2006) and Beugelsdijk et al. (2004) show
that the positive effect between trust and economic growth
found in Zak and Knack (2001) is driven by the inclusion of
developing countries in the sample. An analysis restricted to
developed countries only does not nd any signicant positive
inuence of trust. The coefcients level of signicance increases
by the inclusion of countries with lower GDP per capita and
lower levels of trust. Williamson and Mathers (2011) make
subsamples and nd that both culture and institutions are
signicant in relatively freer countries.
The Role of Institutions
Many authors argue that formal institutions are much more
important for economic development than culture (see e.g.,
Williamson and Mathers, 2011). Institutions such as secure
532 Culture and Economic Development
property rights will give individuals the incentive to invest
and thus lead to development. Acemoglu et al. (2001) argue
that the current differences in GDP per capita in large parts
of Asia, Africa, and America are related to the quality of
current institutions that are determined by the institutions
brought to the countries by European colonizers. The latter
established good institutions in countries with a climate
favorable for settlement. Within Europe the countries that
grew fastest after the fteenth century were the countries
with access to the Atlantic and with institutions that curbed
the inuence of the monarchy (Acemoglu et al., 2005). As
a consequence, whereas the access to the Atlantic lead to
prosperity in Portugal, Spain, The Netherlands, and England,
the latter two countries showed a more rapid growth as they
were better able to curb the absolutist power of the
monarchy.
This discussion has a tendency to set formal institutions
against culture as understood as local values and beliefs. As
illustrated in Figure 1, however, culture and formal institu-
tions are related and, unless they are imposed by foreign
forces, culture and formal institutions are complements and
might reinforce each other. In the earlier mentioned study of
a South Italian village, Baneld (1958: p. 34) notes that
centuries of oppression have left the peasant with a patho-
logical distrust of the state and of all authority. From an
outsiders view, villagers seem passive and lack the aspiration
for improving their circumstances. This attitude is reinforced
or caused by a law passed in fascist times, which prohibits
a villager to go to a town and look for work unless he has
obtained permission by the provincial authorities (Baneld,
1958: pp. 58, 59). Here one can argue that institutions
breed a passive attitude. Another example of the effects of
formal institutions on attitudes is provided by Kunio (2006).
In his view, the lifetime employment provided by Japanese
rms generates a strong sense of identication of Japanese
employees with their company.
Another criticism on the literature about the role of insti-
tutions in promoting economic development concerns the
fact that almost all authors argue that institutions enabling
private initiative are progrowth. Some, among whom Chang
(2008) is prominent, argue that it is not always promarket
institutions that are progrowth. He takes the success of
Asian countries as an example to illustrate the possibility
for governments to arrange growth. Moreover, promoting
promarket institutions in countries, which are not suited for
these rules can even do more harm than good. Finally, he
notes that the governments who are now advocating free
markets (Britain and the United States of America) used
protective measures during their own growth phase. This fact
is also noticed by Landes (1998: p. 266).
A way of disentangling cultural factors from institutional
ones is by studying the culture and performance of districts,
which have common national institutions. Putnams et al.
(1993) study of regional patterns of civic engagement and
governments performance in Italy is a good example in this
regard. He measures civic engagement by the number of sports
clubs per inhabitant, the degree of readership of newspapers,
and the turnout in referenda, where voting is not obligatory. A
regional governments performance is measured by items as:
the number of cabinets during a 10-year period, the speed by
which the annual budget is improved, the ability to use
nationally allocated funds for the intended purpose. Regional
governments appeared to perform better in regions with a high
level of civic engagement, which he also labeled as social
capital. Moreover, the government is less efcient in regions
where local rulers are relatively frequently visited by citizens
and a high percentage of these visits are requests for a job or
another favor. Putnam concludes that social capital, which
includes mutual trust, is crucial for the well functioning of
institutions.
Politicized Culture
Scholars have understood culture to be a general trend to which
the majority of the population adheres, peoples ingrained
attitudes toward different aspects of life. In this view, cultural is
a neutral process in which no particular party plays a specic
role. More recently, however, some scholars emphasize that
culture is often consciously created by power holders to justify
their actions and privileged position. We have labeled this
politicized culture; a purposefully created view on the devel-
opment and origins of a group (mostly nations) created by
political leaders (De Jong, 2009: p. 101). Recent examples are
the Asian and Islamic values debate in Malaysia (Maseland,
2006) and the African renaissance under Mbeki in South
Africa (Bernstein, 2006).
In the early 1980s when Malaysia was in a recession,
Mahathir, the then prime minister of Malaysia, launched the
Look East campaign (Maseland, 2006: Chapter 5). Japan and
Korea gured in this campaign as models for economic growth.
The Eastern work ethic, which was thought to be an important
explanatory factor in these countries success was stressed as an
example for the Malays. Later on, during the boom of the late
1980s and 1990s, the campaign stressed that such values
already existed in Malaysia, are present in Islam, and hence part
of the Malaysian heritage. At that time Mahathir organized an
Islamization of public life, in which contents of Islam were
promoted, which are in accordance with economic reforms.
The pursuit of knowledge, thrift, and hard work were argued to
be basic Islamic values. This view was summarized in Vision
2020, the ideological agenda of Mahathir formulated in 1991.
Whereas in the 1970s in his The Malaya Dilemma, Mahathir
had characterized the Malaya culture as backward, in the 1990s
he pointed at the economic success and capabilities of the
Malaya, summarized in the slogan Malaysia Boleh! (Malaysia
can).
The African Renaissance is the invented element of South
African politicized culture (Bernstein, 2006). It is promoted by
President Thabo Mbeki and a small group of followers.
Elements are the attack on African inferiority, and the promo-
tion of African dignity. It shows pride in Africas heritage but
also in its capacity to modernize and take responsibility.
African Renaissance enables its proponents to advocate
economic reform and democratic governance . as aspects of
an African renaissance and prerequisites for the continent to
claim its rightful place in the world. Essentially, it saves face
while promoting intrinsically Western ideas about change for
the continent (Bernstein, 2006: p. 27). While the African
renaissance can serve as a tool and set of beliefs for the leaders,

it seems to have less impact in the South African people in
general (Bernstein, 2006: p. 28).
Causality
The causality between culture and economic development has
been debated from the very beginning. Webers protestant
ethics is not a uniform plea in favor of the determining role of
culture for economic development. On several places and
in particular in the numerous footnotes, Weber shows that he is
aware of the reverse causality. For example, the dominant
position of protestants in the industry, can in his view, partly
be ascribed to historical circumstances in which religion afl-
iation is not a cause of the economic conditions, but to
a certain extent appears to be the result of them (Weber, 1930:
2001, p. 4).
Historical analyses and case studies allow for studying the
causality by clearly guring out the timeline of the events.
However, the lack of reliable information on attitudes and
dominant values in the past hampers such an analysis. The
cross-country regressions make use of values, which unfortu-
nately are often measured only once or twice. As a result, one
cannot disentangle the time pattern of the values, so that it
becomes almost impossible to investigate the causal relation
between culture (values) and economic growth. Culture could
be a determining factor of growth, but the causality could also
run in the reverse direction; reverse causality. Econometric
studies tackle reverse causality by means of instrumental vari-
ables (IV) estimators. This estimation process consists of two
steps. The rst step explains the endogenous values by means of
exogenous variables, which are not related to the present level
of economic growth. In the second step, the tted values of the
rst step regression replaces the original data. Tabellini (2010)
is a good example of this approach. In his rst step regression
he assumes that the literacy rate at the end of the nineteenth
century and political institutions in previous centuries explain
the level of trust (his proxy for culture) in the 1990s. The tted
values of this regression of trust are found to inuence the
regional differences in per capita income in the 1990s. In this
way the exogenous part of trust (culture) is only incorporated
in the regression and the econometric problems associated with
the endogeneity problem are solved. However, no information
is obtained about the time pattern of culture and economic
growth and thus about their mutual inuence.
The only way to solve this problem is to measure these
phenomena over time. A few studies have done so. Allen et al.
(2007) use a quasi-longitudinal approach; in 2002, they used
the same questionnaire and a sample similar (in the sense of
respondents age and sex) to the sample used by a study from
the beginning of the 1980s for eight Asian countries. They nd
that GDP per capita is associated with certain value patterns;
more submission, embeddedness and hierarchical in relative
poor countries and more support for autonomy and egalitari-
anism in richer countries. The relation between 1982 values
and subsequent economic growth was weak, whereas per capita
income in 1982 correlated strongly with subsequent change in
values. This supports Hofstedes nding that an increase in
income per capita leads to an increase in individualism (2001:
p. 255).
Culture and Economic Development 533
Ways Forward
As discussed in this article, arguments suggest that a period of
economic growth is associated with values such as achievement
motivation and future orientation. Research on the direction of
causality between values, institutions, and economic growth,
however, yields inconclusive results. Historical studies tend to
conclude in favor of values driving institutional change and
thus economic growth. Recent empirical studies deliver
evidence for the opposite causal direction. Consequently, the
direction of causality between values, institutions, and growth
remains on the agenda for future research.
Such an approach should focus on the time pattern between
these three concepts. The current practice of applying IV esti-
mates in cross-section regressions is unsuitable for such an
investigation. Analyses based on longitudinal data sets such as
the World Values Surveys, along with more detailed historical
accounts appear to me as more promising. If possible as many
countries and periods as possible are included in these studies
in order to investigate under which conditions certain
outcomes prevail.
Although certain values are dominant in periods associated
with high levels of economic growth, this does not imply that
countries or regions in which at this time these values are not
important, will not see growth in the future. Evidence suggests
that these values are correlated with the phase of economic
development (see Figure 1). Other values can be correlated with
the way a society is organized. Hofstedes cultural dimension:
uncertainty avoidance, for example, is often found to be impor-
tant for explaining cross-country differences in institutions.
However, it is uncorrelated with economic growth (De Jong,
2009: Chapters 5 and 6). This suggests that some cultural
dimensions are important for explaining differences in the way
societies are organized, whereas others are associated with the
phase of economic development. In accordance with this is the
idea that economic growth does not require a specic set of
institutions. This idea is represented by the empty cells under
institutions and governance in Figure 1. More systematic research
is warranted to investigate the claim that different values are
associated with the organization vs the growth phase of countries.
By far the majority of studies on values and economic
performance are written by Western scholars. A basic principle
in cross-cultural research is to avoid a cultural bias. At the end,
researchers are also formed by the culture they were born in.
Contributions by scholars born in non-Western countries are
very welcome to limit the cultural bias that is present in the
current literature.
See also: Cultural Critique, Anthropological; Culture:
Contemporary Views; Economic Growth; European Religion
from the Atlantic to the Black Sea; Globalization and Religion;
Institutions; Islam: Middle East; Modernity; Moral
Development, Cultural Differences In; Motivational
Development: Cross-Cultural Perspectives; Norms; Obedience:
Social Psychological Perspectives; Organizations, Sociology of;
Religion and Politics in the United States; Religion, Sociology
of; Religion: Morality and Social Control; Religious
Fundamentalism: Cultural Concerns; Scientic Explanation;
Value Pluralism.
534 Culture and Economic Development
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