Understanding Cultural Change

Fernández, Raquel

No 20542, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Culture’s influence on economic outcomes is no longer controversial among economists even if it remains largely ignored in many areas of economics. This paper tackles a different question: why does culture change? The underlying premise adopted here is that culture changes because incentives change, transforming actions and beliefs. An idiosyncratic review of the literature follows that illustrates how the environment (e.g., the prevalence of pathogens or the suitability of land for pastoralism) and historical experiences (e.g., colonization, war, or migration) can affect relationships of power in society and shape people’s beliefs. It then examines the role of new information and ideas (i.e., learning) and finally the role of policies in shaping incentives in changing culture. A second part of the paper reviews work that models the mechanisms of cultural change more explicitly, using quantitative models to examine the interplay between economic incentives and evolving beliefs or preferences and to study the importance of intermediating mechanisms. Given that one of the most profound cultural and economic transformations of the past 150 years concerns gender roles, this theme recurs throughout.

Date: 2025-08
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