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Culture, Diffusion, and Economic Development: The Problem of Observational Equivalence

Author

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  • Ani Harutyunyan

    () (LICOS - Centre for Institutions and Economic Performance at KU Leuven)

  • Ömer Özak

    () (Southern Methodist University)

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

  • Ani Harutyunyan & Ömer Özak, 2017. "Culture, Diffusion, and Economic Development: The Problem of Observational Equivalence," Departmental Working Papers 1702, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:1702
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:ecolet:v:165:y:2018:i:c:p:48-53 is not listed on IDEAS
    2. Jaeggi, Adrian & Legge, Stefan & Schmid, Lukas, 2018. "Dyadic value distance: Determinants and consequences," Economics Letters, Elsevier, vol. 165(C), pages 48-53.

    More about this item

    Keywords

    Comparative economic development; cultural differences; barriers to technological diffusion; individualism; power distance; vertical hierarchy; hedonism; linguistic distance;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • 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
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • 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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