It is by no means always the case that an economy functions well and generates more wealth. Economists have realized, in recent years, that laws and rules are important and affect people's willingness and opportunities to act productively. "Soft" factors are nowadays analyzed as well by economists who do research on morality, norms, and social attitudes, like trust and tolerance. How people regard their own actions and other people may be of great economic importance. Honesty and reliability can, e.g., stimulate growth by enabling innovative risk-taking and smooth transactions. In this project, we study how cultural and social factors of this kind relating to the economy. We especially focus on trying to establish causality: what causes what. For example, there are many indications of trust causing growth, but it is also possible that growth can generate trust. It is often methodologically difficult to discern in what way the effect goes, but in order to give high-quality policy advice, it is essential to clarify causality as much as possible. We do research on how individual norms are formed, how norms affect people's choices, and how the relationships between norms, institutions, and economic outcomes can be characterized on the country level.
The central starting point for this project is that the economy does not function in a vacuum; rather, its actors and their behavior are influenced by both informal institutions (e.g., norms, traditions, and systems of morality) and social attitudes (e.g., trust and tolerance). Earlier research has identified several interesting correlations and, probably, bicausal relationships (Algan and Cahuc 2013). Economic growth seems to be affected by certain social attitudes, such as social trust and certain religious behaviors and positions (Zak and Knack 2001; Durlauf et al. 2012). Spolaore and Wacziarg (2013) especially point out the importance of studying whether social attitudes directly affect productivity or if they affect barriers to spreading productive and innovative ideas. At the same time growth brings with it social change (Friedman 2005). In order to further economic development, it is essential to understand and identify causal relationships. New and sophisticated empirical methods enable us to better investigate the causality between social attitudes and economic outcomes.
These are some of the issues that we study:
- How does social trust affect individuals' income development?
- How is entrepreneurship affected by religion?
- How does the welfare state influence social norms regarding work and welfare benefits?
- How do international trade and cultural exchange affect tolerance?
Hence, the project moves beyond traditional economic explanations to see how culture, broadly conceived, may help explain economic outcomes.