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Culture and economics

Culture and economics. I. Cultural change and Economic development, Algan & Cahuc 09, AER 2010. Knack & Keefer [1997]: Positive correlation between Macroeconomic outcomes and Trust [WVS] Algan & Cahuc seek to identify the causal impact from trust to development

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Culture and economics

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  1. Culture and economics

  2. I. Cultural change and Economic development, Algan & Cahuc 09, AER 2010 • Knack & Keefer [1997]: Positive correlation between Macroeconomic outcomes and Trust [WVS] • Algan & Cahuc seek to identify the causal impact from trust to development • Instrumental variable method: variable that is correlated with trust and get rid of reverse causality but no direct impact on macroeconomic performance, not co-determined with macroeconomic performance. • Trust of second-generation Americans inherited from their country of origin: instrument for the currenttrust in the home country • Inherited trust of two separate cohorts of Americans working in the 1950’s and the 2000’s Culture and Economics, A Survey

  3. Cultural change and Economic development, Algan & Cahuc 09, AER 2010 • General Social Survey (GSS): United States, 1977-2004 , Same question for trust as the WVS • + Country of origin: « From what countries or part of the world did your ancestors come from? » • Comparison of different groups compared to Americans of Swedish ancestors:

  4. Inherited trust of Americans and trust in the home country

  5. Inherited trust and GDP growth : cross-country and panel evidence

  6. Inherited trust and GDP growth : cross-country and panel evidence

  7. Inherited trust and GDP growth : cross-country and panel evidence

  8. Inherited trust and GDP growth : cross-country and panel evidence

  9. Quantifying the effect

  10. II. Cultural Change • Di Tella, Galiani & Schargrodsky, QJE, 07: investigation of the role of property rights in the formation of beliefs. • Endogeneity Issue ? No! natural experiment (Buenos Aires); some squatters received by chance property rights; others did not.

  11. III. Fisman and Miguel, JPE, 07: UN officials civism and Legal Enforcement. Pre 2002: No legal enforcement for UN officials Post 2002: Legal enforcement

  12. IV. Regulation and Trust, Aghion, Algan, Cahuc, and Shleifer (2008) • Document a new correlation: • Regulation is negatively correlated with trust

  13. A simple theory • Two way causality : • Distrust -> Regulation: When individuals have low trust in the civic behavior of other individuals, they fear negative externalities and then vote for more stringent regulations. • Regulation -> Distrust: With higher regulation, individuals have fewer incentives to trust others • Model solved in class

  14. V. Occupational choice and the spirit of capitalism, Doepke and Zilibotti (2008) • Why did the middle class benefit from the industrial revolution, but not the poor nor the landowning elite? • Common answer: the middle class has a different culture, in particular it works harder • Basic idea: • Parents can invest in their children’s degree of patience • Patience affects the children’s choice between current consumption and savings/capital accumulation. • Patience is more important in some occupations (skilled labor=middle class) than in others (unskilled labor, elite) • Here, culture=patience • Model solved in class

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