Political Culture and Economic Outcomes

What kind of an impact does political culture have on political and economic outcomes and are there systematic differences across countries? In this new paper, Alberto Alesina and Paola Guiliano use data culled from the World Value Survey to demonstrate an effect between the strength of family ties (which they argue are different across cultures) and economic outcomes.

Here is the abstract and a link to the paper:

We study the importance of culture, as measured by the strenght of family ties, on economic ehavior and attitudes. We define our measure of family ties using individual responses from he World Value Survey regarding the role of the family and the love and respect that children eed to have for their parents for over 70 countries. We show that strong family ties imply more reliance on the family as an economic unit which provides goods and services and less on the market and on the government for social insurance. With strong family ties home production is higher, labor force participation of women and youngsters, and geographical mobility, lower. Families are larger (higher fertility and higher family size) with strong family ties, which is consistent with the idea of the family as an important economic unit. We present evidence in cross country regressions. To assess causality we look at the behavior of second generation immigrants in the US and we employ a variable based on the grammatical rule of pronoun drop as an instrument for family ties. Our results overall indicate a significant influence of the strength of family ties on economic outcomes.

You hopefully remember the graphic of the tripartite division of society that was shown in class last week. The family, as we mentioned, is one of the fundamental institutions of civil society and the level of involvement of the family in economic decisions and economic output varies greatly across countries. As Alesian and Guiliano observe:

Stronger family ties are associated with lower labour force participation, especially that of youngsters who stay at home longer, and that of women who have traditional roles in these societies as “guardians” of the household, fostering and protecting family ties. Thus stronger family ties mean more is produced at home and less in the market. Since official statistics only take market-production into account, countries with larger home production may have a downward bias in their measure of per capita GDP. This may also suggest that it is NOT the lack of child and care facilities that make women stay at home (an argument that one always hear as a self-evident truth, for instance in Italy), but it may be – right or wrong – the result of a family choice.