Does Culture Cause Economic Development? A Reassessment of the Evidence from European Regions

Abstract

This paper shows that Tabellini’s recent claim to have provided evidence that culture has a causal effect on economic development is unjustified. Tabellini’s claim is based on an instrumental variables analysis in which two instruments are used to identify the supposed causal effect. One of these – past literacy – is an invalid instrument. The other – past political institutions – is a weak instrument. The estimates obtained using this second instrument are so imprecise that they cannot be used to support any conclusions about the effect of culture on economic development.

Keywords: culture, economic development, instrumental variables, weak instruments

JEL Classification: C260, O400, O430, P100