Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/193248 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11954
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Why do some societies fail to adopt more efficient political and economic institutions in response to changing economic conditions? And why do such conditions sometimes generate conservative ideological backlashes and, at other times, progressive social and political movements? We propose an explanation that highlights the interplay - or lack thereof - between productivity, cultural beliefs and institutions. In our model, production shocks that benefit one sector of the economy may induce forward-looking elites to provide public goods associated with a different, more traditional sector that benefits their interests. This investment results in more agents generating cultural beliefs complementary to the provision of the traditional good, which in turn increases the political power of the traditional elite. Hence, productivity shocks in a more advanced sector of the economy can increase investment, political power, and cultural capital associated with the more traditional sector of the economy, in the process generating a revival of beliefs associated with an outdated economic environment.
Subjects: 
institutions
conservatism
cultural beliefs
cultural transmission
institutional change
technological change
JEL: 
D02
N40
N70
O33
O38
O43
Z10
Document Type: 
Working Paper

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