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Culture and Institutions: economic development in the regions of Europe

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  • Guido Tabellini

Abstract

Does culture have a causal effect on economic development? The data on European regions suggest that it does. Culture is measured by indicators of individual values and beliefs, such as trust and respect for others, and confidence in individual selfdetermination. To isolate the exogenous variation in culture, I rely on two historical variables used as instruments: the literacy rate at the end of the XIXth century, and the political institutions in place over the past several centuries. The political and social history of Europe provides a rich source of variation in these two variables at a regional level. The exogenous component of culture due to history is strongly correlated with current regional economic development, after controlling for contemporaneous education, urbanization rates around 1850 and national effects. Moreover, the data do not reject the over-identifying assumption that the two historical variables used as instruments only influence regional development through culture. The indicators of culture used in this paper are also strongly correlated with economic development and with available measures of institutions in a cross-country setting.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 292.

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Date of creation: 2005
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Handle: RePEc:igi:igierp:292

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  1. Arvind Subramanian & Shanker Satyanath, 2004. "What Determines Long-Run Macroeconomic Stability? Democratic Institutions," IMF Working Papers 04/215, International Monetary Fund.
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  13. Fernández, Raquel & Fogli, Alessandra & Olivetti, Claudia, 2002. "Marrying Your Mom: Preference Transmission and Women's Labour and Education Choices," CEPR Discussion Papers 3592, C.E.P.R. Discussion Papers.
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  1. Are Economic Values Transmitted from Parents to Children?
    by Blog Author in Liberty Street Economics on 2014-01-06 12:00:00
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