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The Impact of Cultural Diversity on Economic Growth and Convergence

The Impact of Cultural Diversity on Economic Growth and Convergence. American University in Bulgaria Department of Economics Didar Erdinç Altynai Mukambaeva. Abstract.

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The Impact of Cultural Diversity on Economic Growth and Convergence

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  1. The Impact of Cultural Diversity on Economic Growth and Convergence American University in Bulgaria Department of Economics Didar Erdinç Altynai Mukambaeva

  2. Abstract This research examines the role of cultural differences in explaining the sustained pattern of cross-country differentials in economic growth and convergence. Despite the predictions of conventional economic theory, there is little if any evidence for convergence across poor and rich nations. We check if cultural differences - as non-economic factors - such as individualism, attitude towards risk, power relations and long-term orientation influence economic. Based on our empirical findings, cultural variables do indeed affect the process of growth and improve our understanding of the existing divergences in economic development across nations.

  3. Extant literature Growth models Solow, Robert. "Growth Theory." Greenaway, David, Michael Bleaney and Ian Stewart, eds. Companion to Contemporary Economic Thought. London: Routledge, 1991. 393-415. Print. Culture and growth Grondona, Mariano. "A Cultural Topology of Economic Development." Harrison, Lawrence and Samual Huntington. Culture Matters. New York: Basic Books, 2000. 44-55. Print. Landes, David. "Culture Makes Almost All the Difference." Harrison, Lawrence and Samuel Huntungton, eds. Culture Matters. New York: Basic Books, 2000. 1-13. Print.

  4. Extant literature Econometric Framework Granato, Jim, Ronald Inglehart and David Leblang. "The Effect of Cultural Values on Economic Development: Theory, Hypotheses, and Some Empirical Tests." American Journal of Political Science (1996): 607-631. Electronic Source. Borys, Magdalena, Eva Polgar and Andrei Zlate. "Real Convergence and the Determinants of Growth in EU Candidate and Potential Candidate Countries." Frankfurt am Main: European Central Bank, June 2008. Electronic Source.

  5. Data Sample covers 163 countries. Time period: 1971 to 2012 (41 year). Sources:Economic variables The World Bank, UNCTADCultural variables Geert Hofstede Two panels: annualized data and averages of non-overlapping 4-year intervals.

  6. Data

  7. Data

  8. Econometric framework Growthequation: where is GDP per capita growth for country I, stands for lagged dependent variable, is a set of control variables, and is a set of our main variables of interest – cultural variables. Parameters are and are estimated by generalized method of moments (GMM). Arellano–Bover/Blundell–Bond linear dynamic panel-data estimation.

  9. Generalized Method of Moments (GMM) estimations for growth equation. Annual data, simple model, one-step estimation

  10. Generalized Method of Moments (GMM) estimations for growth equation. Annual data, simple model, two-step estimations.

  11. Generalized Method of Moments (GMM) estimations for growth equation. Annual data, extended model, one-step estimations.

  12. Generalized Method of Moments (GMM) estimations for growth equation. Annual data, extended model, two-step estimations.

  13. GMM estimation results with 4-year averages, simple model, one-step estimation.

  14. GMM estimation results with 4-year averages, simple model, two-step estimation.

  15. GMM estimation results with 4-year averages, extended model, one-step estimation.

  16. GMM estimation results with 4-year averages, extended model, two-step estimation.

  17. Generalized Method of Moments (GMM) estimations for growth equation. Four-year interval averages, simple model with secondary education excluded, one-step estimations.

  18. Generalized Method of Moments (GMM) estimations for growth equation. Four-year interval averages, simple model with secondary education excluded, two-step estimations.

  19. Generalized Method of Moments (GMM) estimations for growth equation. Four-year interval averages, extended model with secondary education excluded, one-step estimations.

  20. Generalized Method of Moments (GMM) estimations for growth equation. Four-year interval averages, extended model with secondary education excluded, two-step estimations.

  21. Conclusion Some cultural dimensions influence economic growth and some are not, as expected :Individualism is beneficial for growth. This is in line with Adam Smith’s theory that self-interest and competition lead economy to optimal output. High power distance detriments economic via social inequalities and limited upward social mobility. Society’s inclination to avoid uncertainty is neutral to growth. We confirmed the positive results of other studies of influence of culture and economic research. The results are in agreement with the endogenous growth theory: we confirmed that high individualism and low power distance are forms of human capital as well and they contribute to the economic growth.

  22. Thank you!

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