A Theory of Strategic Uncertainty and Cultural Diversity

Willemien Kets and Alvaro Sandroni

The Review of Economic Studies, 2021, vol. 88, issue 1, 287-333

Abstract: We identify a new mechanism through which cultural diversity affects economic outcomes, based on a model of culture as shared cognition. Under this view, cultural diversity matters because it increases strategic uncertainty. The model can help better understand a variety of disparate evidence, including why homogeneous societies can be more conformist, why diverse societies may get stuck in a low-trust trap, why companies with a strong culture may fail to adopt superior work practices, and why autocratic rulers in diverse societies may overinvest in state capacity.

Keywords: Culture; diversity; theory of mind; strategic uncertainty; games with strategic complementarities; C72; D01; D02; D80; D90; Z10 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: A Theory of Strategic Uncertainty and Cultural Diversity (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:88:y:2021:i:1:p:287-333.

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