Cultural Consequences For Economic Development:Cross Culture Comparative Study

The idea of the role of cultural factors in economic development and growth has encountered substantial resistance. One reason for this confrontation is the perception of cultural values as being extensively diffused and enduring features of societies. While the standard economic arguments are evidently enough for explaining international differences in savings and growth rates, additional empirical research can help in identifying such cultural factors as may be relevant to analyze economic development.This study represents an attempt at measuring the impact of certain cultural factors on economic growths. Cultural factors are incorporated into baseline endogenous economic growth model applied by using the relevant data from the World Values Survey/European Value Survey (1981-2007). By using the ordinary least squares method in a growth regression framework, we have determined the impact of cultural factors on economic growth by testing certain hypotheses on fifteen cultural variables combined with standard economic variables in seven cultural zones (East Asia, Western Area, African Area, Middle East, Orthodox Area, Indian Area and Latin America), two economic groups (high income and low income countries) and two cultural diversity groups (highly diverse countries and less diverse countries).The cultural variables used for analysis are Cultural Motivational Index, Trust, Hofstede cultural dimensions (individualism, power distance, uncertainty avoidance, muscularity), Schwartz cultural dimensions (affective autonomy, intellectual autonomy, egalitarian commitment), Trompenaars Cultural dimensions (egalitarian commitment, utilitarian involvement) and four cultural diversity variables (ethnic frationalization, ethnic polarization, religious fractionalization, religious polarization). The Cultural Motivation Index, trust and cultural diversity variables were applied on all cultural and economic groups. However, the Hofstede cultural dimensions were used for East Asia zone, Western zone, economic groups and cultural diversity groups. The data for Schwartz and Trompenaars variables were available only for East Asia and Western zone.The results have shown that cultural attitudes towards trust have a positive and significant impact on economic growth in all but Latin America and Indian Area under study.The Cultural Motivational Index also has a significant positive impact on growth but results relating to cultural index are not as reliable as those for trust. In fact, the cultural index appeared to have a robust positive effect of growth in East Asian region, economic groups and culture diversity groups. The present findings suggest that one specific dimension namely-achievement motivation-is highly relevant to economic growth rates in East Asian countries which confirm that values of this region regarding trust, respect, thrift and self-determination greatly encouraged the economic achievement of the region.Further, the Hofstede component of culture, Schwartz cultural dimensions and Trompenaars egalitarian commitment and utilitarian involvement are found to be significant determinants of regional economic performance in Western cultural zone and developed countries. Yet, the same cultural variables do not have a significant impact in East Asian region and developing world. The other cultural dimensions suggested by earlier researchers do not have a robust effect on economic development of any region. The Hofstede dimension of collectivism is positively associated with economic growth in East Asian region only and is in conflict with the results of previous studies.As to the cultural attitudes about religious and ethnic diversity in a society, they are found to be negatively associated with economic growth of the regions chosen for the analysis. Compared to the cultural diversity indices, which are proxies for "ethnic" diversity and religious diversity, fractionalization as part of the prevailing index of ethnic fragmentation and religious fractionalization with ethnic and religious polarization appears to be a better measure to capture the effect of growth. Most of the results of fractionalization results especially those related to ethnic fractionalization show a positive effect on economic growth in economically rich region. The religious polarization has a significant negative impact on growth in Africa, Middle East, Orthodox and developing regions. These findings are consistent with results reported in recent economics literature which hold that exogenous religious diversity is negatively and robustly correlated with economic growth. By contrast, our results suggest that increased religious polarization is negatively related to growth because it reduces the rate of investment and increases public consumption and the incidence of civil wars. Ethnic fractionalization index may not be harmful to development, but the effects of religious polarization on development are more adverse. The religious variable (raised religiously at home) is negatively associated with GDP growth in all regions with weak links.In sum, cultural traits, cultural motivational index, trust, and collectivism are more conducive to economic growth in East Asian region and Hofstede individualism work is more effective in Western region, while cultural diversity, religious polarization are negatively associated with poor countries. However, ethnic fractionalization has been found to be positively correlated with growth in economically rich countries.The findings of this study are important in the sense that they are based on a sound theoretical framework, which has brought to the forefront the role of trust, thrift, respect, self-determination and control in economic growth in East Asia. These results show that the East Asian model of economic growth, which is based on the ideology of moral values of Confucius teaching, is playing a significant role in economic performance of this region. So it can, as a way of recapitulation, be argued that East Asian model of economic development based on morality is more suitable to increase the economic growth in East Asian Region than Western modernization model of economic development, which is based on rationality. The other important finding of this study is that individualism has a robust positive effect on growth in most diverse cultural zones. We may say that individualism with diversity causes creation and innovation, which, in turn, raises the productivity of a country. Similarly, most of our results on fractionalization show a positive impact on growth in economically sound countries. These findings can lead us to conclude that diversity with rationality causes innovation and thus increases the production efficiency, whereas, diversity with irrationality gives rise to conflicts and thus slows down economic activity.