Headlines 2015

International conference on informal institutions

2015-06-12


On 11–12 June, the Research Institute of Industrial Economics (IFN) organized the IFN Stockholm Conference, a two-day conference in Vaxholm, outside Stockholm, with researchers from Sweden, Austria, Denmark, the United States, the Czech Republic, Italy, France and Great Britain. The theme of the conference was “Culture, Institutions and Development”. The researchers, from various perspectives, discussed how informal institutions and culture is of importance to the economic development.

In recent years, the interest in culture has increased among economists, where culture refers to informal institutions (such as norms and morals), social attitudes and environments and organizations (for example networks) where people interact. Leading researchers in this field presented brand-new research on the importance of informal institutions and culture for economic development.

The sixteen studies presented during the workshop dealt mainly with the origin of cultural differences and the impact of these differences on today’s economy. Examples of this research are presented below.

 

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Discussions were lively during the seminar in Vaxholm. From left is Enrico Spolaore, Yves Zenou, Thierry Verdier and Luigi Guiso.

 

Social Networks

Network was the theme of some of the studies presented at the workshop. Yves Zenou (IFN/Stockholm University) presented an experimental study of the effects of social networks on political beliefs – "How Social Networks Shape Our Beliefs: A Natural Experiment among Future French Politicians". Using the random assignment of first-year students to tutorials at The Paris Institute of Political Studies called Sciences Po, the researchers identified convergence of political beliefs among new friends and found that the effect is more prominent among close friends and where initial beliefs are more divergent. 

 

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Alessandra Fogli discussing with Martin Ljunge and Paola Sapienza.

 

In her work, Alessandra Fogli (Federal Reserve Bank of Minneapolis) connects network structures to technology and development. In “Germs, Social Networks and Growth”, she differentiates between individualistic and collectivistic networks. In the former, connected people are more distant (and therefore more efficient when it comes to transmitting various ideas), while the latter are characterized by spatially close and often overlapping relations.

The structure of the network determines the speed of diffusion of innovations – but also how quickly germs are transmitted. This implies that individualistic networks, which promote growth and which should therefore dominate over time, face the threat of extinction when initial levels of germs are high. If this initial level is moderate or low, the individualistic networks exhibit a superior growth path.

 

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Louis Putterman preparing for the presentation of the study "The Influence of Ancestral Lifeway on the Individual Economic Outcomes in Sub-Saharan Africa". Niclas Berggren (right) organized the conference. Berggren is director of the research program Economics of Institutions and Culture.

 

Historical Conditions Shape Contemporary Culture

Many of the Vaxholm participants agreed that it is necessary to go back in time to explain contemporary cultural and economic differences. Historical conditions are relevant since cultural features are relatively stable over time. In addition, the time aspect provides an effective tool for dealing with causality concerns. Louis Putterman (Brown University) presented the study "The Influence of Ancestral Lifeway on Individual Economic Outcomes in Sub-Saharan Africa" which supports the hypothesis that ancestral dependence on agriculture leads to higher levels of wealth and education among descendants, compared to descendants of groups that depended on livestock breeding. The way in which ancestors supported themselves thus has crucial implications for present lifestyles – establishing norms and behaviors which may be more or less beneficial later on.

Taking a historical perspective as well, Martin Ljunge (IFN) presented evidence of more frequent Internet usage among individuals that stem from countries with an advanced communications technology in 1500 CE – "From Gutenberg to Google: 1500 AD Communications Technology Predicts Internet Adoption". To establish this, an empirical analysis of second-generation immigrants is used, relating their Internet behavior to features of the countries from which their parents came. Moreover, results show that that education can counter the effect of having parents from a country that adopted advanced communications technology relatively late.

 

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Luigi Guiso argued for the importance of a common policy between countries included in an economic union.

 

Cultural Shocks

Luigi Guiso (Einaudi Institute for Economics and Finance) argued, in accordance with his study “Cultural Differences and Institutional Integration”, that it is important to understand and deal with cultural clashes that a common policy among countries in an economic union easily gives rise to. The need is particularly high when cultures are distant and in hard times.

The theoretical framework is applied to the euro crisis, focusing on the relationship between Germany and Greece. Using micro data, the researchers show the existence of pre-crisis cultural differences as well as a clearly deteriorating relationship between the two countries as the crisis progresses. The authors claim that Germans’ attitudes towards punishment of wrong-doers clashed with the (lack of) behavioral norms in Greece, leading to inefficiencies and, ultimately, mismanagement of the crisis.

 

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A boat trip back and forth to Stockholm was included in Vaxholm Conference.

 

Participants of the conference 2015:

Yann Algan, Sciences Po, France

Niclas Berggren, Research Institute of Industrial Economics (IFN)/University of Economics in Prague, Sweden/Czech Republic

Andreas Bergh, Research Institute of Industrial Economics (IFN)/Lund University, Sweden

Alberto Bisin, New York University, USA

Christian Bjørnskov, Århus University, Denmark

Jeffrey Butler, Einaudi Institute for Economics and Finance, Italy (until early June)

Alessandra Fogli, Federal Reserve Bank of Minneapolis, USA

Luigi Guiso, Einaudi Institute for Economics and Finance, Italy

Assar Lindbeck, Research Institute of Industrial Economics (IFN)/Stockholm University, Sweden

Martin Ljunge, Research Institute of Industrial Economics (IFN), Sweden

Therese Nilsson, Research Institute of Industrial Economics (IFN)/Lund University, Sweden

Hans Pitlik, Austrian Institute of Economic Research (WIFO), Austria

Eugenio Proto, Warwick University/IZA, UK/Germany

Louis Putterman, Brown University, USA

Paola Sapienza, Northwestern University, USA

Enrico Spolaore, Tufts University, USA

Thierry Verdier, Paris School of Economics, France

Claudia Williamson, Mississippi State University, USA

Yves Zenou, Research Institute of Industrial Economics (IFN)/Stockholm University, Sweden

About the conference

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