DP5505 Does Culture Affect Economic Outcomes?

Author(s): Luigi Guiso , Paola Sapienza , Luigi Zingales

Publication Date: February 2006

Keyword(s): cultural , culture , economic outcomes , culture economics , culture-based

JEL(s): A10 , J10 , Z10

Programme Areas: Financial Economics , Institutions and Economic Performance , International Macroeconomics , International Trade and Regional Economics , Labour Economics , Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5505.asp

Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations. We also present several applications of this methodology: from the choice to become entrepreneur to that of how much to save, to end with the political decision on income redistribution.