Tuesday, April 5, 2011

Fundamental and Free Institutions: GDP Growth in Sub-Saharan Africa

by Samuel Enajero
(University of Michigan at Dearborn, Department of Social Sciences)

Many economies of the world respond differently to economic reforms. While some countries reap the full benefits of reforms, other countries, particularly in sub-Saharan Africa, are struggling. There are underlying cultural factors that act as impediments to economic success. Using IBM/Hofstede (1980) Cultural Dimensions as measures of fundamental institutions and Economic Freedom Index as measures of free institutions, we find statistically significant correlations between cultural dimensions and economic freedom components. High power distance culture (PDI) and low individualism (IND) in developing countries mitigate against the norms that form the bedrocks for free institutions. It is found that PDI has a statistically significant negative influence on business freedom, property rights, and freedom from corruption. IND has a statistically significant positive effect on the same variables. Masculine culture (MAS) has a positive impact on government expenditures and a negative association with freedom from corruption.

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