Culture and Economic Growth
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The most fundamental question in economics is what causes some countries to prosper. An emerging literature has focused on the role of culture in determining growth. I interpret culture as "the collective programming of the mind which distinguishes the members of one group or category of people from those of another," following Hofstede. I focus on the role of culture in determining economic decision making and cooperation, with an emphasis on how cross-cultural differences in how strangers are viewed may influence economic activity by narrowing the scope of interaction. I use modern econometric techniques and neoclassical economic models to formalize the role of culture in economic decision making and test the power of culture to explain cross-country differences in long run growth paths. Throughout my research I assume that agents behave rationally but that culture influences the expectations or beliefs they have about different activities. Subject to the common elements above, each chapter answers a slightly different question. Chapter II focuses on how colonial history may influence decisions over risk-taking in certain countries, leading to a dearth of entrepreneurial activity. Chapter III focuses on how interactions across and between cultural groups may explain the decision of minority immigrant groups to assimilate or segregate over time and how public policy may influence this decision making. Chapter IV looks at the effect of culture through the media of trust and government. Using an instrumental variables strategy, I ask which is more important to economic development, contract quality or interpersonal trust, and find strong evidence that interpersonal trust is more important.