Academic journal article The American Journal of Economics and Sociology

National Values and Economic Growth

Academic journal article The American Journal of Economics and Sociology

National Values and Economic Growth

Article excerpt

Are the dominant economic values of a nation a cause or an effect of economic growth or are they merely an irrelevant variable in the analysis?

It is often claimed that a nation can achieve industrialization and/or rapid economic growth only when a significant share of its population shares certain economic values. Max Weber's ([1904] 1958) theory about Protestantism and the rise of capitalism is one example. Others argue that economic values and attitudes change only as the level of economic development rises, a theory followed by many participants in the analysis of "modernization" in the 1960s and 1970s. Still others (most often, economists) ignore the impact of national values, focusing their attention instead on the activities of a small number of economic actors and the presence or absence of particular institutions such as strict property rights, enforceable contracts, or low information costs.

Relatively few quantitative analyses address the relationship between economic values and economic growth, in good part because of the lack of suitable comparable data on values for many nations. (1) Now, however, some internationally comparable data on values are available and can be used to explore these issues.

This short and exploratory essay is empirical and asks some general questions about the relationship between values and economic growth: Does relating various economic values that people express to pollsters to their actual economic behavior make sense? What economic values cluster together throughout the world that are relevant for market success and economic growth? What impact, if any, do such values have on economic performance? How are such values related to the level of economic development or the economic system?

To explore these issues, I rely extensively on the World Value Study (WVS), a multinational public opinion survey carried out in 1981, 1990-1993, and 1995-1997 and containing over 300 questions. I subject some of these data on values for various countries to a factor analysis in order to isolate clusters of values of direct relevance to the economies that appear together. I then explore the linkage of the derived value clusters to particular economic behaviors. My results suggest that economic values and attitudes allegedly related to success in a market economy do not seem related to economic growth but, instead, are a pan-European cultural phenomenon that is neither the direct cause nor the direct effect of economic development.

My argument proceeds along the following lines. First, I carry out a mini case study to determine whether the economic values and attitudes that people profess to pollsters really have any impact on behavior. More specifically, I show that in various countries, citizens' attitudes toward economic honesty are significantly correlated with their countries' ratings of corruption by outsiders (usually business-people who deal with the governments and private individuals in these countries). With this minor success in mind, I then carry out a factor analysis of 14 economic values and attitudes in 24 nations that have had market economies for many decades in order to determine whether those values usually thought to be closely related to success in market economies occur together. This analysis yields three clusters of values (that is, factors). From the coefficients indicating the strength of association of each value to the cluster (factor loadings), it is possible to calculate scores for each of the three factors for each nation in the sample. These factor scores are then, in turn, subjected to a statistical analysis to answer such questions as: Can these factor scores help us understand differential economic growth rates over the middle term (the last several decades)? How rapidly do the values of a nation change? Are these factor scores related to the economic system? Are these factor scores related to the level of economic development at a single point in time (which would tell us something about the long-term relationship between economic values and growth)? …

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