Heterogeneous Effects of Liberal Institutions on Economic Development: The Role of Cultural Coherence with Formal Institutions

64 Pages Posted: 7 Jul 2020

See all articles by David Soto-Oñate

David Soto-Oñate

University of Vigo; Indiana University

Gustavo Torrens

Indiana University

Date Written: June 11, 2020

Abstract

This article explores the heterogeneous effects of liberal institutions on economic performance depending on the existence of coherent cultural traits. The matching between cultural traits and institutions is what we refer to as cultural-institutional coherence. We study the role played by cultural-institutional coherence on the paths followed by Spanish regions after the country’s liberal reforms in the 19th century. Specifically, we show that liberal reforms induced major changes in Spanish institutions and triggered a significant rearrangement in the distribution of economic development across regions, favoring those regions with cultural traits more coherent with liberal institutions. Endogeneity issues are solved resorting to the different political paths that the regions experienced in their distant past. Political paths are assessed in terms of municipal autonomy in the Middle Ages and constraints on the executive in the early modern age which, we argue, are good instruments for culture.

Keywords: Economic development, institutions, culture

JEL Classification: Z13, D70, P16, O10

Suggested Citation

Soto-Oñate, David and Torrens, Gustavo, Heterogeneous Effects of Liberal Institutions on Economic Development: The Role of Cultural Coherence with Formal Institutions (June 11, 2020). Available at SSRN: https://ssrn.com/abstract=3625273 or http://dx.doi.org/10.2139/ssrn.3625273

David Soto-Oñate (Contact Author)

University of Vigo ( email )

Campus Lagoas-Marcosende
Vigo, Pontevedra 36310
Spain

HOME PAGE: http://davidsoto.webs.uvigo.es/Home.php

Indiana University ( email )

513 N. Park Avenue
Bloomington, IN 47408–3895
United States

Gustavo Torrens

Indiana University ( email )

Wylie Hall, 100 S Woodland Ave
Bloomington, IN 47405-7104
United States
8128568131 (Phone)

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