Individualism-Collectivism, Governance and Economic Development

Kyriacou, Andreas (2015): Individualism-Collectivism, Governance and Economic Development.

Abstract

While an individualist society prizes personal control, autonomy and individual accomplishments, a collectivist society puts a premium on loyalty and cohesion and imposes mutual obligations in the context of in-groups. It has been argued that individualism will promote economic development directly by sharpening individual incentives to invest, innovate and accumulate wealth. In this article, I argue that the individualist-collectivist dimension can also affect development through its impact on governance. The in-group favoritism inherent to collectivist societies is likely to engender corruption, nepotism and clientelism in the public sphere. In individualist societies, the relative weakness of in-group pressures and an emphasis on personal achievement and worth will contribute towards a more meritocratic and efficient public sector. My empirical evidence confirms the strong positive relationship between individualism and government quality. Moreover, I provide robust empirical evidence showing that the expected direct positive impact of individualism on economic development disappears when additionally controlling for governance, a finding which suggests that insofar as individualism affects development it does so because it promotes good governance.

• Item Type: MPRA Paper
• Language: English
• Keywords: culture, individualism, collectivism, in-group favoritism, governance, economic development
• Subjects: D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z10 - General

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