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Culture, diffusion, and economic development: The problem of observational equivalence

Ani Harutyunyan () and Ömer Özak ()

Economics Letters, 2017, vol. 158, issue C, 94-100

Abstract: This research explores the direct and barrier effects of culture on economic development. It shows both theoretically and empirically that whenever the technological frontier is at the top or bottom of the world distribution of a cultural value, there exists an observational equivalence between absolute cultural distances and cultural distances relative to the frontier, preventing the identification of its direct and barrier effects. Since the technological frontier usually has the “right” cultural values for development, it tends to be in the extremes of the distribution of cultural traits, generating observational equivalence and confounding the analysis. These results highlight the difficulty of disentangling the direct and barrier effects of culture. The empirical analysis finds suggestive evidence for direct effects of individualism and conformity with hierarchy, and barrier effects of hedonism.

Keywords: Comparative economic development; Cultural differences; Barriers to technological diffusion; Individualism; Power distance; Vertical hierarchy; Hedonism (search for similar items in EconPapers)
JEL-codes: O10 O20 O33 O40 O57 Z10 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Culture, Diffusion, and Economic Development: The Problem of Observational Equivalence (2017) Downloads
Working Paper: Culture, Diffusion, and Economic Development: The Problem of Observational Equivalence (2017) Downloads
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