Prague Economic Papers 2021, 30(3):290-315 | DOI: 10.18267/j.pep.770

Measuring Mancur Olson: What is the Influence of Culture, Institutions and Policies on Economic Development?

Tomáš Evan ORCID...a, Ilya Bolotov ORCID...b
a Czech Technical University, Prague, Czech Republic
b Prague University of Economics and Business, Prague, Czech Republic

Mancur Olson wrote his influential study Big Bills Left on the Sidewalk: Why Some Countries are Rich, and Others Poor in 1996. In his paper, Olson claimed that the differ-ences in economic development between countries are caused by only two factors: institutions and policies on the one hand and culture on the other. We attempt to test his conjecture using econometric modelling, combining and comparing it with a broadly defined orthodox production function in an indirect neoclassical notation (Solow-Minhas-Arrow-Chenery's SMAC framework). The "pseudo-production function" obtained is econometrically sound and of explanatory power similar to models including economic variables, although we find strong evidence of interdependence between capital-labour share and institutions and policies and culture. We consider the test, performed on panel data from 154 countries over five-year averages from 1980-2014, to be robust and consistent with Olson's ideas.

Keywords: Economic development, Olson' conjecture, institutions and policies, cultural values, Hofstede cultural frameworks, panel data
JEL classification: C23, H50, O15, O38, O43

Received: February 8, 2020; Revised: October 12, 2020; Accepted: December 7, 2020; Published: June 11, 2021  Show citation

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Evan, T., & Bolotov, I. (2021). Measuring Mancur Olson: What is the Influence of Culture, Institutions and Policies on Economic Development? Prague Economic Papers, 30(3), 290-315. doi: 10.18267/j.pep.770
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