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On the joint evolution of culture and institutions

date Date: September 6, 2015
date Author(s): Alberto Bisin, Thierry Verdier
date Affiliation: New York University - Paris School of Economics

What accounts for economic growth and prosperity? What stands at their origin? Recent literature typically searches for single univariate causal explanations: institutions, culture, human capital, geography. In this paper we provide instead a first theoretical modeling of the interaction between different possible explanations for growth and prosperity (in particular, between culture and institutions) and their effects on economic activity. Depending on the economic environment, culture and institutions might complement each other, giving rise to a multiplier effect, or on the contrary they can act as substitutes, contrasting each other and limiting their combined ability to spur economic activity. By means of examples we show how the dynamics display non-ergodic behavior, cycles, and other interestingly complex phenomena.

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