Culture and Stages of Economic Development

Chu, Angus C. and Kou, Zonglai and Wang, Xilin (2021): Culture and Stages of Economic Development. Forthcoming in: Economics Letters

Abstract

How do cultural differences in preferences affect economic development? This study develops a simple growth model that features two stages of development. In the first stage, economic growth is driven by human capital accumulation. In the second stage, economic growth is driven by innovation. The economy does not necessarily experience the transition from the first stage to the second stage. If this endogenous transition does not occur, the economy converges to a steady-state level of output. The economy may remain in this middle-income trap under different conditions. Surprisingly, parental preference for education being too strong is among one of them. This result formalizes a potential explanation for why the Industrial Revolution did not happen in China.

• Item Type: MPRA Paper
• Language: English
• Keywords: culture; education; innovation; economic development; middle-income trap
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

References

Agenor, P.-R., 2017. Caught in the middle? The economics of middle-income traps. Journal of Economic Surveys, 31, 771-791.

Agenor, P.-R. and Canuto, O., 2015. Middle-income growth traps. Research in Economics, 69, 641-660.

Agenor, P.-R. and Neanidis, K., 2015. Innovation, public capital, and growth. Journal of Macroeconomics, 44, 252-275.

Aghion, P., and Howitt, P., 1992. A model of growth through creative destruction. Econometrica, 60, 323-351.

Ashraf, Q., and Galor, O., 2018. The macrogenoeconomics of comparative development. Journal of Economic Literature, 56, 1119-1155.

Chu, A., Cozzi, G., and Liao, C., 2013. Endogenous fertility and human capital in a Schumpeterian growth model. Journal of Population Economics, 26, 181-202.

Chu, A., Furukawa, Y., and Zhu, D., 2016. Growth and parental preference for education in China. Journal of Macroeconomics, 49, 192-202.

Doepke, M., and Zilibotti, F., 2008. Occupational choice and the spirit of capitalism. Quarterly Journal of Economics, 123, 747-793.

Doepke, M., and Zilibotti, F., 2014. Culture, entrepreneurship, and growth. Handbook of Economic Growth, 2, 1-48.

Eicher, T., 1996. Interaction between endogenous human capital and technological change. Review of Economic Studies, 63, 127-44.

Funke, M., and Strulik, H., 2000. On endogenous growth with physical capital, human capital and product variety. European Economic Review, 44, 491-515.

Galor, O., and Moav, O., 2002. Natural selection and the origin of economic growth. Quarterly Journal of Economics, 117, 1133-1191.

Galor, O., and Ozak, O., 2016. The agricultural origins of time preference. American Economic Review, 106, 3064-3103

Hashimoto, K., and Tabata, K., 2016. Demographic change, human capital accumulation and R&D-based growth. Canadian Journal of Economics, 49, 707-737.

Iacopetta, M., 2010. Phases of economic development and the transitional dynamics of an innovation-education growth model. European Economic Review, 54, 317-330.

Irmen, A., 2005. Extensive and intensive growth in a neoclassical framework. Journal of Economic Dynamics & Control, 29, 1427-1448.

Kuwahara, S., 2013. Dynamical analysis of the R&D-based growth model with a regime switch. Journal of Economics, 108, 35-57.

Kuwahara, S., 2019. Multiplicity and stagnation under the Romer model with increasing returns of R&D. Economic Modelling, 79, 86-97.

Lin, J., 1995. The Needham puzzle: Why the Industrial Revolution did not originate in China. Economic Development and Cultural Change, 43, 269-292.

Minter, A., 2021. Banning tutors won't fix China's schools. Bloomberg Opinion, 3 August 2021.

Peretto, P., 1999. Industrial development, technological change, and long-run growth. Journal of Development Economics, 59, 389-417.

Prettner, K., and Strulik, H., 2016. Technology, trade, and growth: The role of education. Macroeconomic Dynamics, 20, 1381-1394.

Romer, P., 1990. Endogenous technological progress. Journal of Political Economy, 98, S71-S102.

Strulik, H., 2005. The role of human capital and population growth in R&D-based models of economic growth. Review of International Economics, 13, 129-145.

Strulik, H., 2007. Too much of a good thing? The quantitative economics of R&D-driven growth revisited. Scandinavian Journal of Economics, 109, 369-386.

Zeng, J., 1997. Physical and human capital accumulation, R&D and economic growth. Southern Economic Journal, 63, 1023-1038.

Zeng, J., 2003. Reexamining the interactions between innovation and capital accumulation. Journal of Macroeconomics, 25, 541-560.

Zilibotti, F., 1995. A Rostovian model of endogenous growth and underdevelopment traps. European Economic Review, 39, 1569-1602.