Explaining economic growth : the role of cultural variables

Abstract

Current economic growth theories have unexplained parts, and do not take into account cultural variables at national levels. Since economic life happens in a social context, this paper investigates further how the norms and goals of a society affect economic development. The paper gives an overview of earlier research on cultural variables and economic growth. Variables which are identified as important are religion, social capital, political preferences, attitudes towards institutions, and Hofstede’s cultural variables. The paper also tests earlier findings empirically, and find that general trust in a society is significant for economic growth, supporting findings from social capital theory. In addition, increased religiosity and power distance is found to be negatively associated with economic development, while individualism is positively associated. However, these relationships are not strong.