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Persistence and Change in Culture and Institutions under Autarchy, Trade, and Factor Mobility

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  • Marianna Belloc
  • Samuel Bowles

Abstract

Differences among nations in culture (preferences including social norms) and institutions (contracts) may result in specialization and gains from trade even in the absence of exogenous differences in factor endowments or technologies. Goods differ in the kinds of contracts that are appropriate for their production, and so strategic complementarities between contracts and social norms may result in a multiplicity of cultural-institutional equilibria. The resulting country differences in culture and institutions provide the basis for comparative advantage. In our evolutionary model of endogenous preferences and institutions, transitions among persistent cultural-institutional configurations occur as a result of decentralized and uncoordinated contractual or behavioral innovations by employers or employees. We show that the gains from trade raise the cost of deviations from the prevailing culture and institutions. As a result, trade liberalization impedes decentralized transitions, even to Pareto-improving cultural-institutional configurations. International factor mobility has the opposite effect.

Suggested Citation

  • Marianna Belloc & Samuel Bowles, 2017. "Persistence and Change in Culture and Institutions under Autarchy, Trade, and Factor Mobility," American Economic Journal: Microeconomics, American Economic Association, vol. 9(4), pages 245-276, November.
    • Handle: RePEc:aea:aejmic:v:9:y:2017:i:4:p:245-76
    Note: DOI: 10.1257/mic.20160079
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    References listed on IDEAS

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    1. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    2. repec:wbk:wbpubs:6014 is not listed on IDEAS
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    Cited by:

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    16. Yuki Takara & Shingo Takagi, 2023. "An empirical approach to measure unobserved cultural relations using music trade data," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 47(2), pages 205-245, June.
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    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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