Values and Norms Matter - On the Basic Determinants of Long-Run Economic Development
38 Pages Posted: 22 Jul 2008
Date Written: July 21, 2008
Over the last couple of decades, it has become a commonplace to claim that institutions matter for economic development. Yet, institutions are not exogenous but the result of human action. It is argued here that the values and norms held by substantial parts of society's members are an important determinant of its institutions. It is further argued that values and norms have both a direct and an indirect effect on economic development: the direct effect materializes because the values and norms also contain the work ethic which, if transformed into behavior, should have direct consequences on economic development. The indirect effect is conjectured to work via the relevant institutions: if institutions are important for economic development and institutions are influenced by the values and norms, then this is a more indirect channel through which values and norms can display their impact.
Keywords: Institutions, Values and Norms, Democracy, Rule of Law, Culture, Social Capital, Civil Society, Economic Development, Total Factor Productivity
JEL Classification: 043, E19, E66, O11, O12, O17, Z13
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