Cultural Dimensions, Collective Values and their Importance for Institutions

This paper critically assesses the role of culture in determining the quality of institutions. Employing various measures of cultural diff erences, I find that only diff erences related to the degree of individualism in society and the extent to which inequality in the distribution of power is tolerated are strong and statistically signi cant predictors of the observed diff erences in institutional quality. This fi nding is robust to the inclusion of various other determinants of institutional di fferences across countries discussed in the literature and it holds for a variety of measures of institutional quality. Moreover, the strong link between these two cultural dimensions and the quality of institutions is also con firmed in instrumental variables regressions where a novel instruments for culture based on a weighted average of the cultural attitudes present in neighboring countries is employed