THE EFFECT OF CULTURAL-VALUES ON ECONOMIC-DEVELOPMENT - THEORY, HYPOTHESES, AND SOME EMPIRICAL TESTS

Theory: Cultural variables are incorporated into a baseline endogenous economic growth model. Hypotheses: Cultural attitudes toward achievem ent and thrift have a positive effect on economic growth. Cultural att itudes concerning postmaterialism have a negative effect on economic g rowth. Methods: Ordinary least squares regression is used to test econ omic and cultural models of growth on a cross section of 25 countries. The encompassing principle is used to resolve competing theoretical s pecifications and to generate a final parsimonious model. A variant of Leamer's Extreme Bounds Analysis (EBA) is used to evaluate the sensit ivity of parameter estimates. The conclusions are further supported by nonparametric methods including robust regression and bootstrap resam pling. The data for the analysis are from the World Values Survey (199 0) and from Levine and Renelt (1992). Results: An empirical model that incorporates both cultural and economic variables is superior to an e xplanation emphasizing one set of these variables. The final model is robust to: (1) alterations in the conditioning set of variables; (2) e limination of influential cases; and (3) variations in estimation proc edures.