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The Ideological Roots of Institutional Change

41 Pages Posted: 6 Apr 2017 Last revised: 27 Jul 2017

Murat Iyigun

University of Colorado at Boulder - Department of Economics; Harvard University - Center for International Development (CID); IZA Institute of Labor Economics

Jared Rubin

Chapman University - The George L. Argyros School of Business & Economics

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Date Written: July 26, 2017

Abstract

Why do some societies fail to adopt more efficient institutions in response to changing economic conditions? And why are such failures often associated with a rise in traditional ideological beliefs? We propose an explanation that highlights the interplay ― or lack thereof ― between productivity shocks, institutions, and ideology. We conceptualize and formalize ideology as the process through which individuals use simplifying heuristics to make generalizations about the complex environment within which they operate. When productivity shocks occur, there is uncertainty regarding how new, more "appropriate" ideologies will interact with the new economic conditions. This uncertainty discourages investment in institutions and the cultural capital necessary to take advantage of new production possibilities, and accordingly, generates ideological movements that place a higher premium on traditional values. Historical analytic narratives support the theory, including Ottoman reform initiatives, the Japanese Tokugawa reforms and Meiji Restoration, and the Tongzhi Restoration in Qing China.

Keywords: Ideology, Institutions, Conservatism, Beliefs, Institutional Change, Technological Change, Uncertainty

JEL Classification: D02, N40, N70, O33, O38, O43, Z10

Suggested Citation

Iyigun, Murat and Rubin, Jared, The Ideological Roots of Institutional Change (July 26, 2017). Available at SSRN: https://ssrn.com/abstract=2946383 or http://dx.doi.org/10.2139/ssrn.2946383

Murat Iyigun

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-6653 (Phone)
303-492-8622 (Fax)

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jared Rubin (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

One University Drive
Orange, CA 92866
United States

HOME PAGE: http://www.jaredcrubin.com

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