Do Culture and Religion Matter for Economic Growth? Evidence from a PCA-Based Culture Index

Ramoutar, Richard (2025): Do Culture and Religion Matter for Economic Growth? Evidence from a PCA-Based Culture Index.

Abstract

This paper re-examines the role of culture and religion in explaining cross-country differences in economic performance, using data from five waves of the Integrated Values Survey (IVS) — which merges the World Values Survey (WVS) and the European Values Study (EVS) — covering the period 1994- 2020. We constructed a cultural index using Principal Component Analysis (PCA) to achieve this goal. This study employs seven leading indicators from the WVS and EVS surveys on cultural development, including control, trust, respect, obedience, and identity. Further, the Generalized Method of Moments (GMM) system estimation was adopted. The findings confirm a significant positive impact of culture and religion on economic growth. These findings support the view that cultural and religious factors should be treated as core elements of the development process, alongside physical and human capital, institutions, and technological determinants.

• Item Type: MPRA Paper
• Language: English
• Keywords: Culture, Religion, Economic Growth, PCA, System GMM.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

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