Individualism–collectivism, governance and economic development

Abstract

While an individualist society prizes personal control, autonomy and individual accomplishments, a collectivist society puts a premium on loyalty and cohesion and imposes mutual obligations in the context of in-groups. It has been argued that individualism will promote economic development directly by sharpening individual incentives to invest, innovate and accumulate wealth. In this article, I argue that the individualist-collectivist dimension can also affect development through its impact on governance. The in-group favoritism inherent to collectivist societies is likely to engender corruption, nepotism and clientelism in the public sphere. In individualist societies, the relative weakness of in-group pressures and an emphasis on personal achievement and worth will contribute towards a more meritocratic and efficient public sector. My empirical evidence confirms the strong positive relationship between individualism and government quality. Moreover, I provide robust empirical evidence showing that the expected direct positive impact of individualism on economic development disappears when additionally controlling for governance, a finding which suggests that insofar as individualism affects development it does so because it promotes good governance.

Cross-Country Determinants of Early-Stage Necessity and Opportunity-Motivated Entrepreneurship: Accounting for Model Uncertainty

“…Indeed, studies offer evidence of a causal relationship between individualism and entrepreneurial initiative (e.g., McGrath, MacMillan, and Scheinberg ; Mueller and Thomas ) and other related outcomes, including long‐term economic growth and novel action (Gorodnichenko and Roland , ). However, Kyriacou () argues convincingly that while individualist societies lean toward providing strong “incentives to invest, innovate, and accumulate wealth,” this influence is channeled, at least in part, through high‐quality political institutions that also result from the same forces. Empirically, once he accounts for the quality of political institutions, the significant relationship between cultural values and economic outcomes completely disappears.…”

“…More importantly, recent research in economics (Gorodnichenko and Roland , ) suggests that among all cultural dimensions, only individualism‐collectivism has a significant effect on long‐term growth and entrepreneurship. Research in political economy further points out that the link between cultural values, such as individualism, and economic growth and entrepreneurship works entirely through the channel of good governance (Kyriacou ). That is, once we control for the quality of formal institutions, the significant relationship between culture and economic growth completely disappears.…”

The influence of the cultural values independence and obedience on regional incomes: Econometric evidence

“…Nevertheless, both variables are linked to Hofstede's cultural dimensions of individualism and collectivism through the distance to the ruling power (independent cultures are characterized by low power distance/individualism, whereas obedient cultures reflect high power distance/collectivism). Both individualism and collectivism have been shown to be highly relevant in the growth literature (see, e.g., Alesina & Giuliano, 2015;Ball, 2001;Guiso et al, 2006;Kaasa et al, 2014;Kyriacou, 2016). We explore whether independence and obedience yield similar results and extend the analysis to the regional level.…”

Individualistic values, institutional trust, and interventionist attitudes

“…Goldschmidt (2005, 2007) and Kyriacou (2016) provide evidence of a positive relationship of different measures of individualism and institutional quality, like the rule of law, absence of corruption, and democratic accountability. All of these are formal institutions, which are regularly found to be conducive to economic growth performance.…”

“…While numerous contributions also discuss the influence of social capital or social trust (e.g., Knack and Keefer 1995, Zak and Knack 2001, Tabellini 2008, Roth 2009, Berggren, Elinder, and Jordahl 2008, Bjørnskov 2012, Algan and Cahuc 2013, recent investigations of potential drivers of successful development argue that 'individualistic values' provide a more favorable cultural background for promoting wealth and prosperity than 'collectivistic values' (Greif 1994, Ball 2001 C.R. Williamson 2009, Tabellini 2010, Gorodnichenko and Roland 2011a, 2011b, Davis 2012, Hansen 2013Kyriacou 2016), although some authors also hold an opposite view (Swank 1996).…”