Cross-Country Performance Differences in State Capacity: Does Culture Play a Significant Role ?

Abstract

This study investigates the relationship between two dimensions of culture, individualism and egalitarianism, and state capacity across countries. Through an analysis of three widely used sets of crosscountry empirical data and controlling for various geographical and historical factors, this study identifies a positive and significant causal relationship between these cultural dimensions and state capacity. The underlying mechanism suggests that individualistic and egalitarian cultures can positively influence state capacity by promoting effective formal institutions and economic performance. Comparatively, institutional factors are more robust than economic factors in the mechanism through which culture influences modern state capacity. This study utilizes crosscountry data to validate the causal chain of "culture → formal institutions → state capacity." Empirical results indicate that culture serves as a deep-rooted cause in this causal mechanism chain, playing a significant role in influencing modern state capacity.

Keywords: Culture, State Capacity, Formal Institutions, Causal Relationship