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Culture Shock and Direct Investment in Poor Countries

Published online by Cambridge University Press:  03 March 2009

John R. Hanson II
John R. Hanson II
Affiliation:
John R. Hanson II is Professor, Economics Department, Texas A and M University, College Station, TX 77843-4228.
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Abstract

The role of culture in economic development is experiencing renewed interest among scholars. This study proposes high intercultural transactions costs as a reason for the enduring scarcity of modem capital and technology in poor countries and conducts a statistical test based on the premise that cultural diffusion reduces these costs. The stock of direct investment in poor countries at the end of the colonial era is shown, as predicted, to be directly correlated with the diffusion of Westem culture in the European empires and elsewhere.

Type
Articles
Information
The Journal of Economic History , Volume 59 , Issue 1 , March 1999 , pp. 1 - 16
Copyright
Copyright © The Economic History Association 1999

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