About the Book

P.E. PetrakisCulture, 
Growth and Economic Policy

• ▶  Shows how culture shapes the economy 
• ▶  Analyses the mutual interdependency between culture and 
  economic development 
• ▶  Describes the development of cultural dimensions and stereotypes 
  It is a wide-spread belief that the cultural background inhered in a society affects the requirements of economic development. This relationship requires theoretical and empirical justification. The present book provides this together with an analysis of
  the development of cultural background itself. Cultural background is embodied in political institutions, in transactions, knowledge, incentives, in social capital, even in
  the tangibles of the economy. Thus, economic development is shaped and the rate of growth is affected. Conversely, economic development affects cultural background. When this interaction takes place at a non-developmental cultural background level, which is associated with low growth rates, then a growth trap is formed. Within such a growth trap, economic policy (public and monetary) is relatively deactivated, and the conditions influencing the change in cultural background and its timing are of primary importance. 

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Sample Pages

Chapter 2
Human Needs and Cultural Background

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Contents

1 Introduction .......................................... 1

References ............................................ 4

Part I The Foundations

2 Human Needs and Cultural Background .................... 9

2.1 Human Needs . . . ................................... 9

2.2 Needs and Economic Evolution . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.3 Needs, Economic Growth and Cultural Background . . . . . . . . . . 14

2.4 From Individual to Aggregate Level . . . . . . . . . . . . . . . . . . . . . 16

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3 The Construction of Cultural Background . . . . . . . . . . . . . . . . . . . 19

3.1 History, Stereotypes and Information Processing . . . . . . . . . . . . 19

3.2 Cultural Background and Cognition . . . . . . . . . . . . . . . . . . . . . . 20

3.3 Components of Cultural Background . . . . . . . . . . . . . . . . . . . . . 21

3.4 Endogenous Cognizance Regarding the Birth of Cultural

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.5 External Factors that Influence the Shaping of

Cultural Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3.6 The Case of Multi-cultural Equilibria . . . . . . . . . . . . . . . . . . . . 27

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4 Culture in Economic Thinking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

4.1 “Culture” in Economic Theory . . . . . . . . . . . . . . . . . . . . . . . . . 29

4.2 The Separation of Culture and Economics . . . . . . . . . . . . . . . . . 31

4.3 Development Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

4.4 The Reemergence of Culture in Economics . . . . . . . . . . . . . . . . 35

4.5 Culture in the Neoclassical Model . . . . . . . . . . . . . . . . . . . . . . . 39

4.6 Culture in the Post-Keynesian/Institutional Model . . . . . . . . . . . 42

4.7 Expectations and Rationality . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

5 Cultural Background and Economic System . . . . . . . . . . . . . . . . . . 51
5.1 Cultural Background and Economic System . . . . . . . . . . . . . . . . 51
5.2 Political Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.3 Economic Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.4 Macro Reflections of Cultural Background: Structures . . . . . . . . 56
5.4.1 Transactions and Entrepreneurship . . . . . . . . . . . . . . . . . 56
5.4.2 Technology and Innovation . . . . . . . . . . . . . . . . . . . . . . 58
5.4.3 Tangibles and Intangibles . . . . . . . . . . . . . . . . . . . . . . . . 59
5.4.4 Shadow Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.4.5 Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.4.6 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.4.7 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . 64
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

6 The Effect of Cultural Background on Incentives, Growth and
Distribution, and Vice Versa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1 Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.2 Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.3 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.4 Reverse Causation: Economic Growth, Wealth
Distribution and Cultural Background . . . . . . . . . . . . . . . . . . . . 78
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

7 Cultural Background and Rationality . . . . . . . . . . . . . . . . . . . . . . . 81
7.1 Rational Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.2 Cultural Traits and Rational Choice Through Experiments . . . . . 83
7.2.1 Cooperation in the Public Good Game
and Time Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.2 Cooperation in the Public Good Game and Trust . . . . . . . 86
7.2.3 Cooperation in the Public Good Game
and Uncertainty/Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.2.4 Cooperation in the Public Good Game
and Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Part II The Cultural Dimensions and the Cultural Background Change

8 Cultural Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.1 Cultural Background, Measurements and Time . . . . . . . . . . . . . 97
8.2 Map of Cultural Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.3 Elements of Culturalism According to Hofstede and GLOBE . . . 104
8.4 Cultural Traits According to the World Values Survey . . . . . . . . 109
8.5 Comparative Analysis of Cultural Dimensions . . . . . . . . . . . . . . 111
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

9 Collectivism as an Aid or Obstacle to Economic Growth . . . . . . . . 117
9.1 Individualism and Collectivism in Social Sciences . . . . . . . . . . . 117
9.2 Factors Shaping Individualism and Collectivism . . . . . . . . . . . . 121
9.3 Characteristics of Collectivism . . . . . . . . . . . . . . . . . . . . . . . . . 122
9.4 Characteristics of Individualism . . . . . . . . . . . . . . . . . . . . . . . . 124
9.5 Individualism and Collectivism and Their Relationships
with Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
9.6 Collectivism to Either Promote or Inhibit Economic Growth . . . . 128
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

10 Power Distance, Uncertainty, Time and Growth . . . . . . . . . . . . . . . 131
10.1 Power Distance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.2 Uncertainty Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
10.3 Time Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
10.3.1 Future Orientation Model . . . . . . . . . . . . . . . . . . . . . . 137
10.3.2 Time Orientation and Decision Making . . . . . . . . . . . . 138
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

11 The Cultural Background Change . . . . . . . . . . . . . . . . . . . . . . . . . 143
11.1 Convergence and Divergence of Cultural Background . . . . . . . 143
11.2 Economic Development and Changes in Values . . . . . . . . . . . . 146
11.3 Culture, Values and Their Diachronic Development . . . . . . . . . 147
11.4 Differences in Values from Generation to Generation . . . . . . . . 153
11.5 The Preservation of Religious Beliefs Over Time . . . . . . . . . . . 154
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Part III Cultural Background, Growth and Policy

12 Economic Growth and Cultural Background . . . . . . . . . . . . . . . . . 161
12.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
12.2 Methodology Employed and Empirical Results . . . . . . . . . . . . 164
12.3 Empirical Work and Discussion . . . . . . . . . . . . . . . . . . . . . . . . 167
12.3.1 The Basic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
12.3.2 Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 168
12.3.3 The Effects of Culture on Growth and
Cultural Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

13 Cultural Background, Transaction Costs and Economic
Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
13.1 The Role of Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . 173
13.2 The Variables Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
13.3 The Methodology Employed . . . . . . . . . . . . . . . . . . . . . . . . . . 177
13.4 Empirical Work and Discussion . . . . . . . . . . . . . . . . . . . . . . . . 177
13.5 The Effects of Culture in Shaping Transactions
and Economic Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

14 The Effects of Culture, Transactions and Institutions
on Opportunity Entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
14.1 The Theoretical Background and the Variables Used . . . . . . . . 183
14.2 The Endogenous Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
14.3 Hypotheses Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
14.4 The Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
14.5 The Methodology Employed . . . . . . . . . . . . . . . . . . . . . . . . . . 187
14.6 Empirical Results and Discussion . . . . . . . . . . . . . . . . . . . . . . 188
14.7 Overall Relationships Derived and Policy Implications . . . . . . . 191
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

15 The Effects of Cultural Background and Knowledge Creation
on Self-Employment and Entry Density Rates . . . . . . . . . . . . . . . . 195
15.1 Entrepreneurship Identification, Knowledge and Cultural
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
15.2 The Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
15.3 The Methodology Employed . . . . . . . . . . . . . . . . . . . . . . . . . . 199
15.4 Empirical Work and Discussion of the Results . . . . . . . . . . . . . 199
15.5 The Overall Relationships Derived . . . . . . . . . . . . . . . . . . . . . 202
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

16 Cultural Background, Growth and Economic Policy . . . . . . . . . . . 205
16.1 The Middle-Income Trap . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
16.2 Why Do Countries Fall into the Middle-Income Trap?
An Economic Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
16.3 The Cultural Growth Trap . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
16.4 Ideal Cultural Background and Growth . . . . . . . . . . . . . . . . . . 211
16.5 Austerity Policy and Cultural Requirements . . . . . . . . . . . . . . . 213
16.6 A Neo-Keynesian Framework of Production
and Employment Decisions and Cultural Requirements . . . . . . 216
16.7 Stabilization Policy and Cultural Background
in South Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Appendix D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Appendix E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

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