Value Diversity and Regional Economic Development

• Published date: 01 January 2019
• Author: Mariko J. Klasing,Petros Milionis,Sjoerd Beugelsdijk
• Date: 01 January 2019
• DOI: http://doi.org/10.1111/sjoe.12253

Scand. J. of Economics 121(1), 153–181, 2019

DOI: 10.1111/sjoe.12253

Value Diversity and Regional Economic

Development*

Sjoerd Beugelsdijk

University of Groningen, NL-9700 AV Groningen, The Netherlands

s.beugelsdijk@rug.nl

Mariko J. Klasing

University of Groningen, NL-9700 AV Groningen, The Netherlands

m.j.klasing@rug.nl

Petros Milionis

University of Groningen, NL-9700 AV Groningen, The Netherlands

p.milionis@rug.nl

Abstract

We investigate the link between culture and regional economic development within European

countries. Considering a variety of cultural values, we provide evidence that it is the degree of

diversity in these valuesat the regional level that strongly correlates with economic performance,

rather than the prevalence of specific values.In par ticular,we show that greater value diversity is

negatively associated with regional economic performance within countries, which also relates

to lower institutional quality and poorer public goods provision.These patterns are robust even

when diversity is measured on the basis of values expressed byemig rants residing outside their

region of origin.

Keywords: Cultural values; regional income differences; sharedness of values

JEL classification:O18; O52; R11; Z10

I. Introduction

How do values and attitudes influence economic development? This

question has been the focus of a growing body of literature that investigates

the potential links between culture and a variety of economic outcomes.1

Initially, this body of literature on cultural economics, as it is commonly

known, was centered on the notion of social trust. Higher levels of trust

across countries and regions have been associated with faster growth (Knack

*This paper has benefited from useful comments and suggestions by two anonymous referees,

seminar participants at the Bonn Max Planck Institute, Gothenburg, Groningen, and the LSE,

and conference participants at the 2015 U4 Cluster Conference, the 2016 CRETE Conference,

and the 2016 CREA Workshop.Sjoerd Beugelsdijk acknowledges financial support from NWO.

1See Guiso et al. (2006), Fern´andez (2011), and Alesina and Giuliano (2015) for excellent

surveys of that body of literature.

C

2017The Authors. The Scandinavian Journal of Economics published by John Wiley& Sons Ltd on behalf of F ¨oreningen

f¨orutgivande av SJE/The editors ofThe Scandinavian Journal of Economics.

This is an open access article under the terms of the Creative Commons Attribution NonCommercial License, which permits

use, distribution and reproduction in any medium, providedthe original work is properly cited and is not used for commercial

purposes.

154 Value diversity and regional economic development

and Keefer, 1997), better functioning institutions (Tabellini, 2008), greater

organizational efficiency (Bloom et al., 2012), and stronger economic ties

with the rest of the world (Guiso et al., 2009). Over time, research

on cultural economics moved beyond trust and started to investigate the

economic impact of other dimensions of culture, such as work attitudes

(Lindbeck and Nyberg, 2006), gender norms (Fern´andez and Fogli, 2009),

views on the market economy (Alesina and Angeletos, 2005), and attitudes

toward democracy (Glaeser et al., 2007).

Existing research has so far mainly focused on the relationship between

economic outcomes and the prevalence of specific cultural values, such

as trust. In the context of such analyses, values expressed by different

individuals are typically averaged at the level of a country or a region and

then compared with economic outcomes at the same level of aggregation.

Following this approach, researchers effectively ignore any differences in

values across individuals in the same location and concentrate on how

average values differ across locations.

However, as recent work by cross-cultural psychologists has shown, the

degree of sharedness of values across individuals in different countries can

vary (Schwartz and Sagie, 2000) and this variation can be larger within

countries than across countries (Fischer and Schwartz, 2011). Gelfand et al.

(2011) provide evidence that cultural values are more heterogeneous in

countries where conformity pressure is weaker and deviant behavior is more

tolerated. Furthermore, Au (1999) documents that not accounting for within-

group differences in cultural values biases the inferences one can make

regarding the effect of culture across groups.

In light of these findings, a natural question is how economic outcomes

relate to the degree of sharedness or diversity in values within a society.

While the notion of diversity has already attracted the attention of

economists, diversity in terms of values is a dimension that has hardly

been analyzed so far. Existing work has considered the role of diversity

in terms of the genetic, ethnic, linguistic, and religious composition of the

population across and within countries (Alesina et al., 2003; Fearon, 2003;

Michalopoulos, 2012; Ashraf and Galor, 2013) and has shown that, in most

cases, its relationship with economic development is negative. For example,

high diversity has been associated with slow economic growth (Easterly and

Levine, 1997), low quality of institutions (La Porta et al., 1999), and poor

public goods provision (Alesina et al., 2016).

In this paper, we focus on the notion of value diversity and investigate

whether and to what extent differences in the degree of sharedness of values

across individuals matter for economic performance.2We measure value

2We prefer the term value diversityfor our object of interest over cultural diversity, as the latter

term can be interpreted more broadly and has already been used in contexts that are unrelated

C

2017The Authors. The Scandinavian Journal of Economics published by John Wiley& Sons Ltd on behalf of F ¨oreningen

f¨or utgivande av SJE/The editors of TheScandinavian Journal of Economics.