The Economics of Institutions and Culture

An economy does not function in a vacuum but consists of people of flesh and blood, with moral values, attitudes towards their fellow human beings and an ability to be affected by laws, rules and norms. This research program at the Research Institute of Industrial Economics (IFN) studies how factors of this kind influence human behavior and, thereby, the way the economy functions – but also how the economy in turn influences morality, norms and social attitudes. The research of this program is conducted by Niclas Berggren, Andreas Bergh, Assar Lindbeck, Martin Ljunge, Therese Nilsson and Yves Zenou.

Program director: Niclas Berggren

Economics has undergone several phases of development during the 20th and 21st centuries. At first the discipline moved away from the broad understanding of the classical economists of man’s way of functioning, and into a more formalized and abstract world of theory. In later years, insights to the effect that institutional, social and cultural factors constitute important explanations of how economics works in different respects have again become part of economic analysis.

This re-orientation began with researchers like Douglass North, Ronald Coase and (in Sweden) Johan Myhrman, and their insistence on the role of formal institutions (i.e., laws and rules) in explaining how the West grew wealthy. Research in this vein has found that private property and a well-functioning legal system are essential for economic actors to dare and want to engage in innovative and productive activities and, thereby, create economic growth.

In later years, this research field has been broadened with studies of how informal institutions, i.e., moral views and norms, are economically significant, and with analyses of cultural phenomena (such as religion) and social attitudes (such as trust and tolerance). It has been shown that factors of this kind are of great importance for economic outcomes. If a large part of a population trusts others it is less costly to enter into agreements with others, since a handshake is sufficient for mutually beneficial transactions to come about. And if people in general are tolerant, this implies that the most suitable people get positions of various kinds irrespective of what group they happen to belong to, which is good for productivity. Likewise, tolerant environments can attract creative and innovative people.

Against this background, the research in this program primarily addresses the following kinds of questions:

  • How social, cultural and institutional factors affect important economic outcomes, such as incomes, economic growth and entrepreneurship.
  • How social, cultural and institutional factors in turn are affected, e.g. by economic and institutional variables and the welfare state.

The research in this program is primarily empirical, but partly theoretical. Different approaches, not only new, sophisticated methods, are used to try to ascertain causality. Similarly, data of different levels is also used (for countries, regions and individuals).

For more detailed information about the program, see the headlines to the left, where the different research projects and the researchers are listed, along with publications and activities in the form of conferences and seminars. The sponsors of the research are also listed.

International cooperation

Visiting researchers

Collaborating with others is essential for IFN as a research institute. Our researchers co-author articles with colleagues from other institutes, and many also teach at various universities and colleges.

As part of our extensive program of guest researchers, leading international researchers visit the institute. The visitors present and pursue their research as well as interact and cooperate with researchers at IFN.

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Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 |