Hostname: page-component-78c5997874-lj6df Total loading time: 0 Render date: 2024-11-08T17:33:59.709Z Has data issue: false hasContentIssue false
  • English
  • Français

Economic freedom reform: does culture matter?

Published online by Cambridge University Press:  31 March 2021

Nicholas Moellman  and
Danko Tarabar
Nicholas Moellman
Affiliation:
College of Business Administration, Winthrop University, Rock Hill, SC29733USA
Danko Tarabar*
Affiliation:
College of Business Administration, Winthrop University, Rock Hill, SC29733USA
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We analyse the role of culture in economic freedom reform and dispersion in an unbalanced panel of up to 80 countries, and in dyadic models with up to 3,003 unique country pairs. We find that a sense of individualism strengthens the effectiveness of democracy in promoting economic freedom within countries over 1950–2015, and that institutional distance between countries increases in their cultural distance, suggesting an important role of culture in determining long-run institutional equilibria. Our results are robust to a large variety of socio-economic controls, measures of institutions and measures of bilateral geographic, economic and demographic distances.

Keywords

Cultureinstitutionseconomic freedom
Type
Research Article
Information
Journal of Institutional Economics , Volume 18 , Special Issue 1: Institutions and Culture in Economic Contexts , February 2022 , pp. 139 - 157
Copyright
Copyright © Millennium Economics Ltd 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alston, L. (1996), ‘Empirical Work in Institutional Economics: An Overview’, in Alston, L., Eggertsson, T., and North, D. (eds.), Empirical Studies in Institutional Change, New York, NY: Cambridge University Press, pp. 25–30.CrossRefGoogle Scholar
Alston, E., Alston, L. J., Mueller, B. and Nonnenmacher, T. (2018), Institutional and Organizational Analysis: Concepts and Applications, New York, NY: Cambridge University Press.CrossRefGoogle Scholar
Ang, J. B. and Fredriksson, P. G. (2018), ‘Culture, Legal Heritage and the Regulation of Labor’, Journal of Comparative Economics, 46(2): 616–633.CrossRefGoogle Scholar
Barro, R. J. and Lee, J. W. (2010), ‘A New Data Set of Educational Attainment in the World, 1950–2010’, NBER Working Paper 15902.CrossRefGoogle Scholar
Bergh, A. (2020), ‘Hayekian Welfare States: Explaining the Coexistence of Economic Freedom and Big Government’, Journal of Institutional Economics, 16(1): 1–12.CrossRefGoogle Scholar
Bergh, A. and Nilsson, T. (2010), ‘Do Liberalization and Globalization Increase Income Inequality?’, European Journal of Political Economy, 26(4): 488–505.CrossRefGoogle Scholar
Beugelsdijk, S., Maseland, R. and Van Hoorn, A. (2015), ‘Are Scores on Hofstede's Dimensions of National Culture Stable Over Time? A Cohort Analysis’, Global Strategy Journal, 5(3): 223–240.CrossRefGoogle Scholar
Bisin, A. and Verdier, T. (2017), ‘On the Joint Evolution of Culture and Institutions’, NBER Working Paper No. w23375.Google Scholar
Bromley, D. W. (1989), ‘Institutional Change and Economic Efficiency’, Journal of Economic Issues, 23(3): 735–759.CrossRefGoogle Scholar
Cai, M., Murtazashvili, I., Murtazashvili, J. and Salahodjaev, R. (2020), ‘Individualism and Governance of the Commons’, Public Choice, 184(1-2): 175–195.CrossRefGoogle Scholar
Cline, B. N. and Williamson, C. R. (2017), ‘Individualism, Democracy, and Contract Enforcement’, Journal of Corporate Finance, 46: 284–306.CrossRefGoogle Scholar
Coppedge, M., Lindberg, S., Skaaning, S.-E. and Teorell, J. (2016), ‘Measuring High Level Democratic Principles Using the V-Dem Data’, International Political Science Review, 37(5): 580–593.CrossRefGoogle Scholar
Cruz-García, P. and Peiró-Palomino, J. (2019), ‘Informal, Formal Institutions and Credit: Complements or Substitutes?’, Journal of Institutional Economics, 15(4): 649–671.CrossRefGoogle Scholar
Davis, L. and Williamson, C. R. (2016), ‘Culture and the Regulation of Entry’, Journal of Comparative Economics, 44(4): 1055–1083.CrossRefGoogle Scholar
Davis, L. and Williamson, C. R. (2018), ‘Open Borders for Business? Causes and Consequences of the Regulation of Foreign Entry’, Southern Economic Journal, 85(2): 508–536.CrossRefGoogle Scholar
Esteban, J., Mayoral, L. and Ray, D. (2012), ‘Ethnicity and Conflict: An Empirical Study’, American Economic Review, 102(4): 1310–1342.CrossRefGoogle Scholar
Gorodnichenko, Y. and Roland, G. (2011), ‘Which Dimensions of Culture Matter for Long-Run Growth?’, American Economic Review Papers and Proceedings, 101(3): 492–498.CrossRefGoogle Scholar
Gorodnichenko, Y. and Roland, G. (2017), ‘Culture, Institutions, and the Wealth of Nations’, Review of Economics and Statistics, 99(3): 402–416.CrossRefGoogle Scholar
Gorodnichenko, Y. and Roland, G. (2020), ‘Culture, Institutions and Democratization’, Public Choice, forthcoming.Google ScholarPubMed
Greif, A. (1994), ‘Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies’, Journal of Political Economy, 102(5): 912–950.CrossRefGoogle Scholar
Gwartney, J., Lawson, R., Hall, J. and Murphy, R. (2019), ‘Economic Freedom of the World: 2019 Annual Report’, The Fraser Institute.Google Scholar
Hall, J. C. (2016), ‘Institutional Convergence: Exit or Voice?’, Journal of Economics and Finance, 40(4): 829–840.CrossRefGoogle Scholar
Hall, J. C. and Lawson, R. A. (2014), ‘Economic Freedom of the World: An Accounting of the Literature’, Contemporary Economic Policy, 32(1): 1–19.CrossRefGoogle Scholar
Hofstede, G. (2001), Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations, Thousand Oaks, CA: Sage Publications.Google Scholar
Inglehart, R. (1997), Modernization and Postmodernization: Cultural, Economic, and Political Change in 43 Societies, Chichester, West Sussex: Princeton University Press.CrossRefGoogle Scholar
Kandogan, Y. (2012), ‘An Improvement to Kogut and Singh Measure of Cultural Distance Considering the Relationship Among Different Dimensions of Culture’, Research in International Business and Finance, 26(2): 196–203.CrossRefGoogle Scholar
Kingston, C. and Caballero, G. (2009), ‘Comparing Theories of Institutional Change’, Journal of Institutional Economics, 5(2): 151–180.CrossRefGoogle Scholar
Kogut, B. and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode’, Journal of International Business Studies, 19(3): 411–432.CrossRefGoogle Scholar
Kunčič, A. (2014), ‘Institutional Quality Dataset’, Journal of Institutional Economics, 10(1): 135–161.CrossRefGoogle Scholar
La Porta, R., Lopez-de Silanes, F., Shleifer, A. and Vishny, R. (1999), ‘The Quality of Government’, The Journal of Law, Economics, and Organization, 15(1): 222–279.CrossRefGoogle Scholar
Leibrecht, M. and Pitlik, H. (2015), ‘Social Trust, Institutional and Political Constraints on the Executive and Deregulation of Markets’, European Journal of Political Economy, 39: 249–268.CrossRefGoogle Scholar
Marshall, M. G. (2017), Codebook: Major Episodes of Political Violence (MEPVv2016) and Conflict Regions, 1946–2016. Center for Systemic Peace.Google Scholar
Munck, G. L. and Verkuilen, J. (2002), ‘Conceptualizing and Measuring Democracy’, Comparative Political Studies, 35(1): 5–34.Google Scholar
Murphy, R. H. and Lawson, R. A. (2018), ‘Extending the Economic Freedom of the World Index to the Cold War Era’, The Cato Journal, 38(1): 265–284.Google Scholar
Nikolaev, B. and Salahodjaev, R. (2017), ‘Historical Prevalence of Infectious Diseases, Cultural Values, and the Origins of Economic Institutions’, KYKLOS, 70(1): 97–128.CrossRefGoogle Scholar
North, D. C. (1989), ‘Final Remarks-Institutional Change and Economic History’, Journal of Institutional and Theoretical Economics (JITE), 145(1): 238–245.Google Scholar
North, D. C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Pejovich, S. (1999), ‘The Effects of the Interaction of Formal and Informal Institutions on Social Stability and Economic Development’, Journal of Markets & Morality, 2(2): 164–181.Google Scholar
Roland, G. (2004), ‘Understanding Institutional Change: Fast-Moving and Slow-Moving Institutions’, Studies in Comparative Economic Development, 28: 109–131.CrossRefGoogle Scholar
Roland, G. (2015), ‘Economics and Culture’, in Scott, R., and Kosslyn, S. (eds), Emerging Trends in the Social and Behavioral Sciences, Hoboken, NJ: Wiley, pp.1–18.Google Scholar
Ruttan, V. W. (2006), ‘Social Science Knowledge and Induced Institutional Innovation: An Institutional Design Perspective’, Journal of Institutional Economics, 2(3): 249–272.CrossRefGoogle Scholar
Savoia, A. and Sen, K. (2016), ‘Do We See Convergence in Institutions? A Cross-Country Analysis’, The Journal of Development Studies, 52(2): 166–185.CrossRefGoogle Scholar
Schwartz, S. H. (1992), ‘Universals in the Content and Structure of Values: Theoretical Advances and Empirical Tests in 20 Countries’, Advances in Experimental Social Psychology, 25: 1–65.CrossRefGoogle Scholar
Spolaore, E. and Wacziarg, R. (2016), ‘Ancestry, Language and Culture’, in Ginsburgh, V. and Weber, S. (eds.), The Palgrave Handbook of Economics and Language, Chapter 7, London: Palgrave Macmillan, pp. 174–211.Google Scholar
Williamson, O. (2000), ‘The New Institutional Economics: Taking Stock, Looking Ahead’, Journal of Economic Literature, 38(3): 595–613.CrossRefGoogle Scholar