Economics of Culture – Applied Methods

Purpose. The purpose of the course is two-fold: One purpose relates to the topic of the course; to give students an understanding of how cultural values may influence society. The idea of the literature is that our cultural values influence how we act, including how we act as economic agents. When working with the topic, we will go through the literature, including both theoretical and empirical models to further our understanding of how cultural values impact society. The second purpose relates to the method; to teach students the application and intuitive interpretation of microeconometric methods in micro- and macroeconomic research. When working with the method, we will also focus on how to conduct independent research, relevant for master theses, seminars, and the later real-world problems.

Topic. The broad questions asked is “Why are some societies richer, more educated, more democratic, less prone to conflict, or happier than others?” Some proximate answers is that some societies have obtained higher productivity and investment rates in human- and physical capital. We go deeper to ask why some societies then are so much more productive and invest more than others, experience less conflict, and are more likely to be democratic? The answers to this deeper question can be grouped into three categories: culture, institutions, and geography. This course will focus on the role of culture, which means for instance the role of trust, religion, or individualism in society. We will pay extra attention to religion, which may influence both the cultural values of the inhabitants of a society and the institutions that surround them. For instance, religions often have different rules that get ingrained into the culture of a society, thus influencing peoples’ actions.

Method. The course includes a hands-on introduction to relevant methods that are common in several economics fields. Empirical research in macroeconomics has seen a great leap forward with the emergence of Big Data, which has been used in microeconomic research for some time. During the course, the students will work with the data behind some of the main papers themselves, learning the intuition behind the micro-econometric analysis, and learn how to make sound choices and arguments, how to construct variables useful for micro-econometric analysis, and how to present results in an intuitive way. The main part of the course will focus on the intuition behind econometric techniques that students have already learnt in other courses. In addition, we will introduce one method that may be new to some; handling spatial data. Spatial data includes all data that can be visualized on a map. With fairly easy techniques, students will be able to calculate different variables based on these maps.

The course will start with two broad lectures on the economics of culture field. The remaining lectures will focus on the following three topics. Each topic introduces a question and a method and will commence with a lecture by Jeanet introducing the topic, followed by an exercise session, where students work with the method and data themselves, instructed by Jeanet. While the topics spans various research, the concrete datasets consist mainly of data from Jeanet’s own research, but the datasets are broad enough for the students to employ them to investigate other cultural dimensions and other economic outcomes.

Topic 1. What determines democracy? We will explore answers to this questions based on differences in cultural values. For instance, what role does the cultural dimensions individualism / collectivism play in the emergence of democracies. We will also explore how religion influences the transition from autocracy to democracy. For instance, we will work with empirical research documenting that so-called divine legitimacy, which is the use of religion for power purposes, may have prevented some economies from democratizing. Exercises: Students will work with datasets spanning 1265 historic societies spanning the globe and cross-country data. The students will learn how to calculate variables from points on a map and combine them with other spatial data.

Topic 2. What determines differences in cultural values across the globe? When attempting to determine the impact of cultural values for society, we will have to also think about where these differences in cultural values came from. We will discuss why this is important. Some questions that we will address is why is it that the inhabitants of some societies trust eachother much more than the inhabitants of other societies? And why are some societies more religious than others? Exercises: When working with cultural values, some of the most relevant datasets are the World Values Survey and the European Values Study. We will work with both and learn how to deal with large survey datasets that span the globe.

Topic 3. How did cultural values determine the emergence of science and modern growth? What role did psychology play? For instance, how did individualism or religion matter? Some historical anecdotes suggest that religion was good for the emergence of science. Others suggest that religion hampered the development of science. To settle the dispute, we will work with theoretical and empirical research. Exercises: When working with cultural values such as religion, individualism or trust, we often need to be quite creative when trying to measure these variables, especially when we go back in history. Students will be introduced to these issues, how to deal with them, and get ideas for some of these creative get-arounds. For instance, we will work with novel research that that uses peoples’ names to infer cultural values of their parents. The students will then work with these data to estimate the impact of religiosity and individualism on modern economic growth. The students will learn how to work with individual-level data that spans Europe and to work with panel data of European cities.

After each topic, the students will get time to formulate their own research questions based on the dataset used for the particular topic. These questions will form the basis for synopses that enter the 3-4 assignments handed in throughout the course. The synopses should include the students’ own research questions, arguments for why the particular question is relevant for economists, which model should be used to examine the question, and how to deal with potential endogeneity problems. It is not the intention of this course that the students estimate their models econometrically. That could potentially be done in future master theses.