Working Paper BETA #2020-18

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Title : Culture, Institutions and Economic Growth

Author(s) : Marion Payen, Patrick Rondé

Abstract : Are formal and informal institutions complementary or substitutable ? In this article, we argue that formal and informal institutions have a complementary relationship rather than a substitutable one. We study the possible complementarity between formal institutions, measured by Institutional Profiles Database (IPD), and informal institutions, measured by the World Value Survey (WVS), by including both into a growth model. Our main result shows that the interaction effect between informal and formal institutions in a country positively impacts growth, which support the hypothesis of a complementary between both of them.

Key-words : economic growth, formal institutions, informal institutions

JEL Classification : O11, O43