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Individualism-Collectivism, Governance and Economic Development

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  • Kyriacou, Andreas

Abstract

While an individualist society prizes personal control, autonomy and individual accomplishments, a collectivist society puts a premium on loyalty and cohesion and imposes mutual obligations in the context of in-groups. It has been argued that individualism will promote economic development directly by sharpening individual incentives to invest, innovate and accumulate wealth. In this article, I argue that the individualist-collectivist dimension can also affect development through its impact on governance. The in-group favoritism inherent to collectivist societies is likely to engender corruption, nepotism and clientelism in the public sphere. In individualist societies, the relative weakness of in-group pressures and an emphasis on personal achievement and worth will contribute towards a more meritocratic and efficient public sector. My empirical evidence confirms the strong positive relationship between individualism and government quality. Moreover, I provide robust empirical evidence showing that the expected direct positive impact of individualism on economic development disappears when additionally controlling for governance, a finding which suggests that insofar as individualism affects development it does so because it promotes good governance.

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  • Kyriacou, Andreas, 2015. "Individualism-Collectivism, Governance and Economic Development," MPRA Paper 65151, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65151
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    More about this item

    Keywords

    culture; individualism; collectivism; in-group favoritism; governance; economic development;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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