Is culture a determinant of financial development?
AbstractThe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35867.
Date of creation: 13 May 2011
Date of revision:
Informal Institutions; Financial Development; Culture; Social capital;
Other versions of this item:
- Nabamita Dutta & Deepraj Mukherjee, 2012. "Is culture a determinant of financial development?," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 585-590, April.
- G1 - Financial Economics - - General Financial Markets
- Z1 - Other Special Topics - - Cultural Economics
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-25 (All new papers)
- NEP-CFN-2012-01-25 (Corporate Finance)
- NEP-CUL-2012-01-25 (Cultural Economics)
- NEP-EVO-2012-01-25 (Evolutionary Economics)
- NEP-MFD-2012-01-25 (Microfinance)
- NEP-SOC-2012-01-25 (Social Norms & Social Capital)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guido Tabellini, 2008. "Presidential Address Institutions and Culture," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 255-294, 04-05.
- Christopher Coyne & Claudia Williamson, 2009. "Trade Openness and Culture," Working Papers 09-05, Department of Economics, West Virginia University.
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