Abstract
We identify a new mechanism through which cultural diversity affects economic outcomes, based on a model of culture as shared cognition. Under this view, cultural diversity matters because it increases strategic uncertainty. The model can help better understand a variety of disparate evidence, including why homogeneous societies can be more conformist, why diverse societies may get stuck in a low-trust trap, why companies with a strong culture may fail to adopt superior work practices, and why autocratic rulers in diverse societies may overinvest in state capacity.
Original language | English (US) |
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Pages (from-to) | 287-333 |
Number of pages | 47 |
Journal | Review of Economic Studies |
Volume | 88 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1 2021 |
Keywords
- C72
- Culture
- D01
- D02
- D80
- D90
- Z10
- diversity
- games with strategic complementarities
- strategic uncertainty
- theory of mind
ASJC Scopus subject areas
- Economics and Econometrics