Culture and Economics: Marriage Institutions and Siblings Competition

Wikimedia Commos. Author: Latrobebohs

Traditional institutions interact in interesting ways with social and economic change. This article studies how traditional marriage practices induce trade-offs among sisters, tradeoffs most intense at intermediate levels of female schooling. Across four large South Asian countries, parents rush a daughter’s marriage search if she has younger sisters and delay her marriage search if she has older sisters, at the expense of spousal quality. These effects are especially strong in settings where grooms are scarce, search frictions are large, and arranged marriage is common. Because girls leave school when they marry and depend on their husbands for economic support in adulthood, the effects have long-term consequences. In Nepal, where data on adult women are available, younger sisters cause earlier school-leaving, lower educational attainment and adult literacy, lower spousal educational attainment and spousal occupational status, and marginally lower adult household economic status. Sibling rivalry over leaving the nest has effects that last long after all siblings have left it.

From a paper by Tom S. Vogl.  

Culture and trade (Germany)

In this paper, we examine the effect of dialect similarity on intra-German trade patterns. Applying a standard gravity model of trade, we find that linguistic ties strongly promote trade. Since differences in local dialects do not hinder direct communication, and since all parts of Germany share a common institutional framework, we interpret our findings as evidence for the effect of culture on trade.

Source. 
HT: Roberto Zanola.

The Cistercians, culture, and economic development

. . . [T]he Cistercians influenced comparative regional development across English counties, even after the monasteries were dissolved in the 1530s. Moreover, we find that the values emphasized by Weber are comparatively more pervasive in regions where Cistercian monasteries were found historically. Pre-industrial development in England may thus have been propelled by a process of growth through cultural change.

That is the abstract of a new paper by Barnebeck Andersen et al (July 2012), "Religious Orders and Growth through Cultural Change in Pre-Industrial England." They conclude:

. . . [T]he Cistercians ignited a process of growth through cultural change. That is, a gradual change in local populations in terms of taste for hard work and thrift; much like Max Weber suggested was the end result of the Protestant Reformation. 

We believe this explanation is plausible for three reasons. First, a cultural concordance between the Cistercians and the Protestants, in the dimensions of work ethic and thrift, has already been observed by several scholars including Weber himself. Second, the cultural explanation has the virtue of being able to plausibly account for the long-term persistency of Cistercian influence on growth. Third, consistent with the cultural mechanism we find, using data from the European Values Survey, that Catholic regions in Europe which historically were influenced relatively more by the Cistercians tend to have populations with greater taste for hard work and, to a lesser extent, thrift today. 

Overall, this research suggests that Weber was right in stressing the importance of a cultural appreciation of hard work and thrift, but quite likely wrong in tracing the origins of these values to the Protestant Reformation.

HT: Roberto Zanola. 

Culture and tax evasion?

Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases.

That is from the paper "Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States" by DeBacker, Heim, and Tran.

To be sure, I do not like these results at all (I am all for free immigration). But here the paper is for your consideration. Immigration has to be judged considering many variables (through the lenses of general equilibrium). 

HT: Catalina Granada Carvajal.

Culture of transparency

Russian firms initially founded in partnerships with foreign corporations are twice as transparent in reported earnings of their workers as other Russian firms, but they are still less than half as transparent as foreign firms themselves. We also find that increased links to foreign corporations, such as hiring more workers from them, raise the transparency of domestic firms. An important channel for this transmission appears to be the need to keep official wages and salaries of incumbent workers close to wages domestic firms have to pay to their newly hired workers with experience in multinationals.

That is from the new paper "Foreign Corporations and the Culture of Transparency: Evidence from Russian Administrative Data" by Serguey Braguinsky and Sergey V. Mityakov.

The Case of Religion and Entrepreneurship

This is the abstract of a new paper: "The Implications of Cultural Background on Labour Market Choices: The Case of Religion and Entrepreneurship" by Nunziata and Rocco:

We suggest a methodology for identifying the implications of alternative cultural and social norms embodied by religious denomination on labour market outcomes, by estimating the differential impact of Protestantism versus Catholicism on the propensity to be an entrepreneur, on the basis of the diverse minority status of both confessions across European regions. Our quasi-experimental research design exploits the stronger degree of attachment to religious ethic of religious minorities and the exogenous historical determination of the geographical distribution of religious minorities in Europe. Our analysis of European Social Survey data collected in four waves between 2002 and 2008 in 22 European countries, indicates that cultural background has a significant effect on the individual propensity to become an entrepreneur, with Protestantism increasing the chances to be an entrepreneur by around 3% with respect to Catholicism. Our findings, stable across a number of robustness checks, provide further evidence on the need to take cultural elements into consideration when analysing economic behaviour.

Gender in Language and Gender in Employment

Women lag behind men in many domains. Feminists have proposed that sex-based grammatical gender systems in languages reinforce traditional conceptions of gender roles, which in turn contribute to disadvantaging women. This article evaluates the empirical plausibility of this claim in the context of the labour market outcomes of women. Based on a sample of over 100 countries, the analysis shows that places where the majority language is gender-intensive have lower participation rates of women in the labour force.

This is from this new working paper, by Astghik Mavisakalyan (Australian National University). 

Is this world fair? The Latin perspective

This is from a fascinating article, "The demand for Social Insurance: Does Culture Matter?", published in the The Economic Journal (2011) by Eugster et al: 

Does culture shape the demand for social insurance against risks to health and work? We study this issue across language groups in Switzerland where a language border sharply separates social groups at identical actual levels of publicly provided social insurance. We find substantially stronger support for expansions of social insurance among residents of French, Italian or Romansh-speaking language border municipalities compared with their German-speaking neighbours in adjacent municipalities. Informal insurance does not vary enough to explain stark differences in social insurance but differences in ideology and segmented media markets potentially contribute to the discrepancy in demand for social insurance.

The authors conclude:

. . . [O]ur estimates suggest that the demand for social insurance (as measured by voting results) is up to 10 percentage points higher among the Latin-Swiss population than among the German-Swiss population. We also find consistently higher (lower) support for more generous (restrictive) unemploy- ment and health insurance regulations among the Latin-Swiss than among the German-Swiss population . . . 

We find evidence that Latin speakers believe less than German speakers that hard work pays off, and they feel they have less freedom and control over their lives. This is consistent with an ideological predisposition that favours redistribution. A reason for such ideological differences may be historical. Latin Swiss have been the oppressed minority for centuries and repeated experience of suppression may have fostered weaker beliefs in a just world. Finally, we have documented the strong segmentation of media markets by language regions. The lack of social communication between language groups via media on important political issues such as the introduction and/ or reform of social insurance programmes can explain the lack of convergence in beliefs among social groups that live under similar institutional arrangements. Thus, historical factors that shape beliefs can have persistent effects.

Trust, Religion, and Exchange

Countries with a long history of wars tend to trust each other less. France and England, for example, that have a record of 198 years of war (more than ten times the average of 19) should exhibit a bilateral trust that is 0.7 of a standard deviation lower than average, which accounts for the lower bilateral trust we observe between them. Religious similarity has a positive impact on trust, compared to a case where no common religion is shared, a match where 90% of the citizens share the same religion (e.g., Italy and Spain) raises trust by 15 percentage points (corresponding to 40% of its standard deviation).

That is from the article “Cultural Biases in Economic Exchange?” (QJE 2009) by Zingales, Guiso and Sapienza. 

Protestant Ethic and Prosperity: The case of Almolonga, Guatemala.

This is a revised version of my paper: Protestant Ethic and Prosperity: Vegetable Production in Almolonga, Guatemala. 
Abstract:

Weber’s theory of the protestant ethic helps explain economic prosperity in some communities in Latin America. Although some communities have valuable economic resources and also the entrepreneurial skills to transform those resources, the Protestant worldview has helped communities to get closer to their socio-economic potential, given market and institutional constraints. The indigenous community of San Pedro de Almolonga in the Guatemalan highlands has become a very prosperous town through the production and commercialization of vegetables. Prosperity has emerged due to the high fertility of the soil (which is a function of the geographic location of the town), to the entrepreneurial skills of its inhabitants, and to the high market demand for vegetables. This article argues that Protestantism has been an almost perfect complement that has made possible the maximization of Almolonga’s economic potential. Protestantism has provided the informal institutions that direct individual skills towards highly productive entrepreneurship.     

More on the link between religion and economics

This is from an article in The Economist: [very interesting!]

Peter Berger, an American sociologist, has found that Weber’s theories have a certain plausibility in Latin America, where a Protestant, and especially a Pentecostalist minority, outperforms the Catholic majority. Both there and in Africa an individualist Protestant “prosperity gospel” which links financial success with divine favour seems more popular with the upwardly mobile than the recent Catholic stress on “liberating” the poor as a class. South Koreans (both in their homeland and as migrants to America) often convert from Buddhism to Protestantism as they rise economically. All this may reflect the fact that some kinds of Protestantism (like many strains of Islam) sit easily with a disciplined, reflective way of life. It would be odd if that had no economic effects.

But many attempts to link doctrine and economics have run up against exceptions and better explanations. In the Ottoman empire (and in some post-Ottoman places), Christian and Jewish minorities flourished in business. Yet this did not imply stereotypical “fatalism” or “backwardness” among Muslims; the main point was that desirable posts in public or military service were closed to non-Muslims.

Similarly, contemplating Greece’s economic woes, it is easy to dream up some theory that connects Orthodox Christianity (and its comparatively charitable attitude to human weakness) with corruption or cronyism. Orthodoxy has a less pessimistic view of “original sin” than the Christian West—and its prayers for the dead emphasise “no man lives who does not sin”. Does that imply winking at misdeeds? Possibly—but then try explaining why Greek-Americans, who are at least as devout as their motherland kin, do so very well in business, education and public service. The plausible reason lies in America’s institutions which make it easier to prosper in an honest way. Keep reading . . . 

Thanks to Lucas Rentschler for the pointer. 

Marx vs. Weber: Does Religion affects Politics and the Economy?

This is a very interesting paper: Marx vs. Weber: Does Religion affects Politics and the Economy. 

The introduction to the theme:

[T]he impact of cultural factors on the economy and politics goes back at least to Karl Marx and Max Weber. Whereas Marx saw culture merely as an expression of the prevailing economic order, Weber allowed for culture to have an independent effect on the economy. For most of the past decades, the economics literature seems to have sided with Marx on this issue by simply ignoring culture as a possible causal factor in economics and politics. Culture was deemed too vague a concept to be useful in economic analysis. Recent years however have seen a resurgence of interest in cultural explanations, Guiso et al. (2006) [it is here, and is becoming a classic] provide an excellent introduction to work on culture in economics.   

 Abstract:

We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure and for redistribution and intervention in the economy. With a Fuzzy Spatial Regression Discontinuity Design, we exploit a historical quasi- experiment in Western Switzerland, where in the 16th century a so far homogeneous region was split and one part assigned to convert to Protestantism. We find that Reformed Protestantism reduces the fraction of citizens voting for more leisure by 13, and that voting for more redistribution and government intervention by respec- tively 3 and 11 percentage points. These preferences are found to translate into greater income inequality, but we find no robust effect on average income.

The method: 

Early in the 16th century, some cantons adopted the Reformation whereas others did not, which leaves us with both a treatment and control group. 

Focusing on Switzerland has not only methodological but also substantive advantages. Previous work on Weber lumps together the various branches of Protestantism in Western Europe. The Protestant Ethic, however, distinguishes between different branches of Protestantism, and it is Calvinism in which the beliefs supporting a strong work ethic appear in its starkest form. Lutheranism, on the other hand, lacked the mechanisms Weber considered crucial for the spirit of Capitalism to emerge. Thus, studies based on Lutheran regions are not well suited to judge Weber’s claims. Switzerland, in contrast, is the birthplace of Calvinism, which from there expanded into the Netherlands and the Anglo-Saxon world.

Interesting note on Weber's ideas: 

We show that Max Weber’s classic includes hypotheses not only about work ethic and thriftiness, but also about political preferences, with far-ranging implications for the choice of political institutions and therewith also on  economic outcomes like average income and income inequality. In particular, this literature suggests that, relative to Roman Catholicism, Reformed Protestantism has curbed preferences for redistribution and for government intervention in the economy.

Results: 

Our empirical results suggest that ceteris paribus in a Reformed Protestant electorate support for increasing leisure time will be about 13 percentage points lower than in a Catholic electorate, and that support for government intervention will be about 11 percentage points lower. These results are robust to varying our methodology along all relevant dimensions. Support for redistribution is also lower in Protestant municipalities, but the significance of the results depends on the specification. We do not find an equally robust effect on average income, but we do find the Protestant municipalities to exhibit clearly higher income inequality. 

The paper also has a very good review of the literature [and it uses fireplaces as a proxy for population density!] HT Mostly Economics.

Paper of the day: Does culture affect investment behavior?

From the paper: Does Culture Influence Asset Managers’ Views and Behavior? by
Daniela Beckmann, Lukas Menkhoff, and Megumi Suto.

Abstract: This research enters new ground by presenting comparative survey evidence on asset managers' views and behavior in the United States, Germany, Japan and Thailand. Relying on Hofstede's four cultural dimensions, we find that cultural differences are most helpful in understanding country differences which cannot be explained by pure economic reasoning. In short, controlling for various determinants, the dimension of more Individualism predicts less herding behavior, more Power Distance leads to older and comparatively less experienced managers in the upper hierarchy, Masculinity brings men into top positions and to higher volumes of assets under personal responsibility, and Uncertainty Avoidance is related to higher safety margins against the tracking error allowed and relatively more research effort. These consequences, i.e. the culturally different importance of herding, age, experience, gender, tracking error and research effort, clearly affect investment behavior, although in a complex way.

Source

Culture, Institutions and the Wealth of Nations

Abstract: We construct an endogenous growth model that includes a cultural variable along the dimension of individualism-collectivism. The model predicts that more individualism leads to more innovation because of the social rewards associated with innovation in an individualist culture. This cultural effect may offset the negative effects of bad institutions on growth. Collectivism leads to efficiency gains relative to individualism, but these gains are static, unlike the dynamic effect of individualism on growth through innovation. Using genetic data as instruments for culture we provide strong evidence of a causal effect of individualism on income per worker and total factor productivity as well as on innovation. The baseline genetic markers we use are interpreted as proxies for cultural transmission but others have a direct effect on individualism and collectivism, in line with recent advances in genetics and cross-cultural psychology. The effect of culture on long-run growth remains very robust even after controlling for the effect of institutions and other factors. We also provide evidence of a two-way causal effect between culture and institutions.

Source

Culture affects the attitude towards risk,

this paper (2010) argues.

Abstract:      

This study explores the links between culture and risk tolerance, based on surveys conducted in 23 countries. Altogether, more than 4,000 individuals participated in the surveys.

Risk tolerance is associated with culture. Risk tolerance is relatively low in countries where uncertainty avoidance is relatively high and in countries which are relatively individualistic. Risk tolerance is also relatively low in countries which are relatively egalitarian and harmonious. And risk tolerance is relatively high in countries where trust is relatively high.

Culture is also associated with risk tolerance indirectly, through the association between culture and income-per-capita. People in countries with relatively high income-per-capita tend to be relatively individualistic, egalitarian, and trusting. Risk tolerance is relatively high in countries with relatively low income-per-capita.

PS, The author uses this data to complement the survey work.

The future of economics - Daron Acemoglu

[C]ultural factors are central for understanding the evolution, and the persistence, of institutions. Source (HT @cblatts).

What is cultural economics and how can it help us understand economic growth?

From a paper by Alberto Alesina: (HT @cblatts)

We as economists always start with the assumption that preferences are primitive, exogenously given and we have nothing to say about where they come from. Cultural economics will lead in the direction of being more ambitious. Perhaps we can make some progress in the explanation of where certain attitudes are born, how they persist and what leads to a change. As economists, not only do we think of preferences as primitive but also as constant over time. This cultural analysis will also help us understand the evolution of preferences and will link up with other fascinating areas of research like that of “persuasion,” that is, how certain messages may change not only information and beliefs but also the utility function of individuals. Another connection here is with the literature on identity, pushed, amongst others, by George Akarloff.

Fascinating!

But a cautionary note:

One has to admit that to study culture is not easy. It is a concept that is hard to measure and it is easy to fall into a trap of “anything goes”. We should maintain the rigor that economists have, even in the study of culture. Identification problems are huge. Reverse causality always looms in the background of these studies on culture. But we should not shy away from tackling big issues in economics. In my opinion, our profession is slipping too much into perfectly tight methodologies applied to smaller and smaller problems. We may perfectly identify certain things based upon “natural experiments”. But what we uncover may be quite small and none very general. Keep reading . . .