Culture Matters: A Test of Rationality on Economic Growth

Forson, Joseph Ato and Janrattanagul, Jakkaphong and Carsamer, Emmanuel (2013): Culture Matters: A Test of Rationality on Economic Growth. Published in: Asian Social Science , Vol. 9, No. 9 (9 July 2013): pp. 287-300.

Abstract

There are widespread debates as to whether cultural values have a bearing on economic growth. Scholarly articles have actually had conflicting results with proponents arguing there is whiles opponents have thought otherwise. The aim of this paper is to verify the assertions made by these two schools of thought from the perspective of culture as a rationality component using an input-output growth model. We basically employed an approach that sought to define and aggregate cultural values under rationality indices: instrumental, affective, value and traditional rationality from 29 countries with data from world value survey (1981-2009). We systematically had them tested in an endogenous growth model alongside traditional economic variables. We conclude that when these cultural variables are combined with the so-called economic variables, there is an improvement in the model explanation than before. In addition, two of these cultural indices indicated a statistically positive effect on economic growth (instrumental and affective rationality). However, traditional rationality index was also robust but with a negative coefficient. Value rationality showed a somewhat weaker link to economic growth and was statistically insignificant. The policy implications of these findings are also discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth, Rationality, Cultural traits
• 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; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies

References

Alexander, K., & Kumaran, P. (1992). Culture and development: culture patterns in areas of uneven Development. Sage Publications.

Azariadis, C., & Allan, D. (1990). Threshold externalities in economic development. Quarterly Journal of Economics, (105), 501-526.

Barro, R. (1990). Government spending in a simple model of endogenous Growth. Journal of political economy.

Barro, R. (1991). Economic growth in a cross section of countries. Quarterly Journal of Economics, 106(2), 407-443.

Checkel, J. T. (1998). The constructivist Turn in International Relations Theory. World politics, 2, 324-348. Coyne, C. J., & Williams, C. (2009). Trade Openness and Culture. Mimeo.

Cozzi, G. (1998). Culture as a bubble. Journal of Political Economy, (106), 376-394.

Cypher, J. M., & Dietz, J. L. (2004). The process of Economic Development (2nd ed., p. 229). London and New York: Rutledge.

Data, W. B. (2009). World Development Indicators. World Bank. Retrieved from http://www.data.worldbank.org

Denison, D. R., & Mishra, A. (1996). Towards a theory of organizational culture and effectiveness. Organizational Science, 6(2), 204-223.

Fukuyama, F. (1995). Trust- The Social Virtues and the Creation of Prosperity. Free Press. New York.

Faria, R., Miguel A., & Ledesma, L. (2004). Habit formation, work ethics and technological progress. University of Manchester, 72(3), 403-413.

Gunnar, M. (1957). Economic theory and underdeveloped regions. Hutchinson publications.

Granato, J., Inglehart, R., & Leblang, D. (1996). The effect of cultural values on economic development: theory, hypotheses, and some empirical tests. American Journal of Political Science, 40(3), 607-631.

Hofstede, G. H. (1984). Culture consequences: International differences in work- related values. Beverly Hills: Sage.

House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, Leadership and Organizations: the GLOBE study of 62 societies. Sage Publication.

Jackman, R. W., & Ross, A. M. (1996). The Poverty of Political Culture. American Journal of Political Science, 40(3), 697-716.

Johnson, J. P., & Lenartowicz, T. (1998). Culture, freedom and economic growth: Do cultural values explain economic growth? Journal of World Business, 33(4), 332-356.

Jonathan Hanson, K. (2009). Cultural values and economic growth: a new look at past findings. Syracuse University.

Herman, K. (1979). World Economic Development: 1979 and Beyond. West view Press.

Kroeber, A., & Kluckhohn. (1952). Culture: A critical Review of concepts and Definitions. Cambridge, papers of Peabody museum of America Archeology and Ethnology, XLVII(1), 41-79.

Landes, D. (2000). Culture matters: how values shape human progress. (edited by L. E. Harrison, & S. P. Huntington, 1st ed.). New York: Basic Books.

Lawrence, H. (1985). Underdevelopment is a state of mind (2nd ed.). New York: University Press of America.

Lawrence, H. (1997). The Pan American Dream–Do Latin America’s cultural values discourage true partnership with the United States and Canada (1st ed., p. 33). New York: Basic Books.

Levine, R., & Renelt, D. (1992). A sensitivity Analysis of cross- country growth Regressions. America economic review, 82(4), 942-963.

Lewis, A. (1955). The Theory of Economic Growth. London: Allen & Unwin.

Lucas, R. (1988). The Mechanics of Economic Development. Journal of Monetary economics, (22), 3-42.

Max, W. (1958). The Protestant Ethic and the Spirit of Capitalism. New York: Charles Scribner’s Sons.

Mankiw, N. G., Romer, D., & Weil, D. (1992). A Contribution to the Empirics of Economic Growth. Quarterly Journal of Economics, (152), 407-437.

McClelland, D. C. (1953). The Achievement motive. New York: Appleton-Century-Crosts.

McClelland, D. C. (1961). The Achieving Society. Van Nostrand: Princeton.

McSweeney, B. (2002). Hofstede’s Model of national cultural differences and their consequences: A triumph of faith- a failure of analysis. Human relations, 55(1), 89-118.

Muhammad, K., Jianhua, Z., Muhammad, S., & Mohsin, B. (2010). Cultural values and economic Growth in Asia: An empirical analysis. International journal of Business and social sciences, 1(2). Retrieved from http://www.ijbssnet.com/journals/Vol._1_No._2_November_2010/3.pdf

Myrdal, G. (1968). Asian Drama: An inquiry into the poverty of Nations. The twentieth century fund.

North, D. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge university press. Orlando, P. (2006, March). A poverty of the mind. The New York Times, 13.

Petrakos, G., Paschalis, A., & Pavleas, S. (2007). Determinant of Economic growth: the experts’ view. Dynreg, 20. Retrieved from http://www.esri.ie/research/research_areas/international_economics/dynreg/papers/Working_Paper_No._20.pdf

Rittberger, V. (2002). Approaches to the Study of Foreign Policy Derived from International Relations Theory. A paper presented to ISA Annual meeting.

Sala-i-Martins, X. (1997). I just ran two million regressions. America Economic Review.

Schein, E. H. (1985). Organizational culture and leadership. Organizational culture and leadership (1st ed.). San Francisco: Jossey- Bass Publishers.

Schwartz, S. H. (1994). Beyond individualism/collectivism: new cultural dimensions of values. In U. Kim, H. C. Triandis, C. Kagitcibasi, S. C. Choi, & G. Yoon (Eds.), Individualism and Collectivism: theory method and applications (pp. 85-119). Thousand Oaks, California: Sage Publication.

Shixue, J. (1998). Cultural factors and economic performance in East Asia and Latin America. Institute of Latin American Studies.

Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, (70), 65-94.

Survey, W. V. (2010). World Value Survey. Retrieved from http://www.worldvaluesurvey.org

Thomas, M. (1798). An essay on the principle of population. St. Paul’s Church-Yard. Retrieved from http://www.esp.org/books/malthus/population/malthus.pdf

Tabellini, G. (2009). Culture and Institutions: Economic Development in the Regions of Europe. Journal of the European Economic Association.

Trompenaars, A., & Hampden-Turner, C. (1997). Riding the waves of culture: understanding cultural diversity in global business (2nd ed.). New York: McGraw-Hill.

Vaughan, C. (2003). The organizational culture and effectiveness of companies involved in public sector housing construction in Hong Kong. CIB TG 23 International conferences. Hong Kong.

Wilderom, C. P., Glunk, U., & Maslowski, R. (2000). Culture as a predictor of organizational performance. In N. M. Ashkanasy, C. P. Wilderom, & M. F. Peterson (Eds.), Handbook of organizational culture and climate (pp. 193-209). California: Sage Publications.

Yuriy, G., & Roland, G. (2010). Culture, Institutions and the wealth of nations. Preliminary publication. Retrieved from http://emlab.berkeley.edu/~ygorodni/gorrol_culture.pdf