Abstract:
There are widespread debates as to whether cultural values have a bearing on economic growth. Scholarly
articles have actually had conflicting results with proponents arguing there is whiles opponents have thought
otherwise. The aim of this paper is to verify the assertions made by these two schools of thought from the
perspective of culture as a rationality component using an input-output growth model. We basically employed
an approach that sought to define and aggregate cultural values under rationality indices: instrumental,
affective, value and traditional rationality from 29 countries with data from world value survey (1981-2009).
We systematically had them tested in an endogenous growth model alongside traditional economic variables.
We conclude that when these cultural variables are combined with the so-called economic variables, there is
an improvement in the model explanation than before. In addition, two of these cultural indices indicated a
statistically positive effect on economic growth (instrumental and affective rationality). However, traditional
rationality index was also robust but with a negative coefficient. Value rationality showed a somewhat weaker
link to economic growth and was statistically insignificant. The policy implications of these findings are also
discussed.
Keywords: economic growth, rationality, cultural traits
