Abstract
Why do similar economic and political institutions function differently in various cultures? This paper tries to identify potentially important factors related to the institutional quality. We investigate the relationship between cultures, cultural dimensions: non-tradition in particular, and formal institutions to explain differences in the quality of institutions around the world. We use a measure of traditional values, structured by Inglehart and Baker, from the World Values Survey, to extend the literature on the determinants of institutions’ quality. We show that differences in traditional values are suggestive to explain differences in the quality of institutions across countries. The OLS method is utilized in order to analyze the factors of institutional quality in sixty countries in 2010–2014. In this study, the OLS models are employed in order to understand the key factors of institutional differences among countries in the period of 2010–2014. The empirical model results show that (i) non-tradition is a reliable significant variable with positive contributions on six institutional quality variables, (ii) urbanization has unexpected negative effects on some institutional quality indicators like rule of law, political stability and voice/accountability. However, it has meaningful contribution to control of corruption in the countries, (iii) economic development have increasing impacts on the majority of the institutional quality variables, (iv) while education has positive effects on government effectiveness, political stability and regulation quality, it has negative unexpected impacts on rule of law and voice/accountability, (v) openness has only effects on corruption and political stability, (vi) there are non-linear relationships between dependent variable(s) and independent variables rather than linear relationships
Highlights
Interdisciplinary studies in economics have again received increasing attention among those interested in the differences in incomes and institutional quality among countries and regions (Tabellini, 2008; Tabellini, 2010; Gorodnichenko, Roland, 2010; Gorodnichenko, Roland, 2012; Gorodnichenko, Roland, 2013; Alesina, Giuliano, 2013, Alesina, Giuliano, 2015; Roland, 2016a)
Indicators like rule of law etc., NT is the combined measure or index of culture by the authors, Y is the economic development represented by the real GDP per capita, Open is the openness indicator represented by the sum exports and imports of goods and services as a percentage of GDP, Urban is the percentage of urban population to total population, Educ is the proportion of adult population aged 15 years and above that is literate, and u is the error term
The OLS models are employed in order to understand the key factors of institutional differences among countries in the period of 2010–2014
Summary
Interdisciplinary studies in economics have again received increasing attention among those interested in the differences in incomes and institutional quality among countries and regions (Tabellini, 2008; Tabellini, 2010; Gorodnichenko, Roland, 2010; Gorodnichenko, Roland, 2012; Gorodnichenko, Roland, 2013; Alesina, Giuliano, 2013, Alesina, Giuliano, 2015; Roland, 2016a) The early scholars such as Smith and Weber tried to analyze the cultural effects on economic performance in order to explain the disparities between rich and poor nations. Alesina and Giuliano (Alesina, Giuliano, 2015) claim that this definition is used in the most research papers in the economic literature International datasets such as the World Values survey and the General Social Survey, since 1980s, have made it possible to measure the cultural values and beliefs and use them in the economic analysis (Roland, 2016a).
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