Is culture a determinant of financial development?

Nabamita Dutta () and Deepraj Mukherjee ()

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates the missing link in the literature – whether informal institutions, or what is known as culture, can affect the level of financial development for a country? Our hypothesis stresses that the cultural dimensions of a country can have an impact on its financial set up. We consider multiple dimensions of culture, identified in the literature by Tabellini, to test our hypothesis. As culture evolve in the form of greater trust, control and other traits, individuals’ attitudes towards financial market change, and they engage in greater financial transactions. This, in turn, leads to better financial development. Using quantile estimation technique for a cross-section of 90 countries we find that culture significantly influences the level of financial development. To ensure the robustness of our findings we use Hofstede’s cultural dimension-‘uncertainty avoidance index’ as an alternative measure for culture. Our results hold for multiple measures of financial development.

Keywords: Informal Institutions; Financial Development; Culture; Social capital (search for similar items in EconPapers)
JEL-codes: G1 O17 Z1 (search for similar items in EconPapers)
Date: 2011-05-13
New Economics Papers: this item is included in nep-cfn, nep-cul, nep-evo, nep-mfd and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Applied Economics Letters 00 (2011): pp. 1-6

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35867

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