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Culture, diffusion, and economic development: The problem of observational equivalence

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  • Harutyunyan, Ani
  • Özak, Ömer

Abstract

This research explores the direct and barrier effects of culture on economic development. It shows both theoretically and empirically that whenever the technological frontier is at the top or bottom of the world distribution of a cultural value, there exists an observational equivalence between absolute cultural distances and cultural distances relative to the frontier, preventing the identification of its direct and barrier effects. Since the technological frontier usually has the “right” cultural values for development, it tends to be in the extremes of the distribution of cultural traits, generating observational equivalence and confounding the analysis. These results highlight the difficulty of disentangling the direct and barrier effects of culture. The empirical analysis finds suggestive evidence for direct effects of individualism and conformity with hierarchy, and barrier effects of hedonism.

Suggested Citation

  • Harutyunyan, Ani & Özak, Ömer, 2017. "Culture, diffusion, and economic development: The problem of observational equivalence," Economics Letters, Elsevier, vol. 158(C), pages 94-100.
  • Handle: RePEc:eee:ecolet:v:158:y:2017:i:c:p:94-100
    DOI: 10.1016/j.econlet.2017.06.040
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    Cited by:

    1. Jäggi, Adrian & Legge, Stefan & Schmid, Lukas, 2017. "Dyadic Value Distance: Determinants and Consequences," Economics Working Paper Series 1718, University of St. Gallen, School of Economics and Political Science.
    2. repec:eee:ecolet:v:165:y:2018:i:c:p:48-53 is not listed on IDEAS

    More about this item

    Keywords

    Comparative economic development; Cultural differences; Barriers to technological diffusion; Individualism; Power distance; Vertical hierarchy; Hedonism;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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