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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 self determination. To isolate the exogenous variation in culture, we rely on two historical variables used as instruments: the literacy rate at the end of the 19th 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. (JEL: O10, F10, P10, N13) (c) 2010 by the European Economic Association.

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  • Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 677-716, June.
    • Handle: RePEc:tpr:jeurec:v:8:y:2010:i:4:p:677-716
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    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • F10 - International Economics - - Trade - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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