Redistribution and the Individualism–Collectivism Dimension of Culture

Abstract

This paper examines the relationship between culture and redistribution, focusing on the individualism–collectivism dimension of culture. Perhaps surprisingly, countries with more individualistic cultures have significantly greater income redistribution and lower after-tax income inequality. This finding also holds when using instruments for individualism suggested by the literature on cross-cultural psychology, including historical pathogen prevalence and linguistic and genetic characteristics. The association between individualism and redistribution is driven by higher-income countries, which appear to be influenced by a distinct strain of individualism. Data from the World Values Survey reveals that in higher income countries, individualism is positively correlated with generalized trust and tolerance of outsiders and negatively correlated with belief in traditional gender roles. In lower income countries, individualism is associated with a stronger emphasis on self-reliance and the benefits of competition.

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Fig. 1
Fig. 2

Notes

  1. 1.

    However, early political economists including Adam Smith (1759), John Stuart Mill (1843), and Max Weber (1930) discuss the importance of culture in explanations of economic phenomena; see Guiso et al. (2006) for details.

  2. 2.

    From 1967 to 1973, 116,000 questionnaires were conducted in 20 languages. Analysis was later extended from 40 to 72 countries (Hofstede 2001).

  3. 3.

    Hofstede (2001, p. 17) emphasizes that his analysis is at the country level (ecological), not at the individual level (psychological): “Cultures are not king-size individuals. They are wholes, and their internal logic cannot be understood in the terms used for the personality dynamics of individuals. Eco-logic differs from individual logic.” Thus, his cultural dimensions are better suited for analysis of outcomes at the level of nations, like macroeconomic outcomes and redistribution (Bond 2002). At the individual or within-culture level, Triandis (1995) distinguishes between allocentrism and idiocentrism. An individual can be idiocentric yet live in a collective society, for example.

  4. 4.

    While Hofstede conceptualizes individualism and collectivism as opposite poles of a single dimensional construct, others present them not as opposites, but as distinct dimensions (Triandis et al. 1986; Kim et al. 1994).

  5. 5.

    For more on Weber’s “Protestant work ethic” and its association with individualism, and the association of religiosity and individualism–collectivism, see Kagitcibasi (1997).

  6. 6.

    The quotation is from Fevre’s summary of Fevre (2016) at https://ralphfevre.wordpress.com/2016/09/01/individualism-and-inequality-chapter-two/. Similarly, Paine’s contemporary, Adam Smith, believed that individualism based on a belief in the reality of others’ feelings was a necessary restraint on self-interest, and worried that the division of labor could erode belief in universal human feelings.

  7. 7.

    The GLOBE measure of in-group collectivism practices is from Gelfand et al. (2004), accessed from the web appendix to Fincher et al. (2008). The correlation between the Hofstede individualism and GLOBE collectivism measures is − 0.75. Results are also robust to the inclusion of additional control variables, including polity score and colonial history. The coefficient on individualism is also positive and of similar magnitude if the regression is run separately for Asia nd the Pacific or Europe and the Americas.

  8. 8.

    The World Bank data (2015 update) is gathered from survey institutes, think tanks, non-governmental and international organizations, and private sector firms. The data is publicly available at www.govindicators.org. See Kaufmann et al. (2010). Variables are normalized to have mean zero and standard deviation 1, with higher values indicating stronger governance.

  9. 9.

    Disease prevalence is coded from epidemiological maps in Rodenwaldt and Bader (1952) and Simmons et al. (1944), where 0 denotes that the disease was never reported, 1 denotes rarely reported, 2 denotes sporadically or moderately reported, and 3 denotes severe or epidemic levels. They compute the z-score for each disease, and the index for a country is sum of its z-scores.

  10. 10.

    An allele is one of several alternative forms of a gene. A polymorphism can refer to a change in a single letter in the DNA code or to a stretch of DNA that is different between two alleles.

  11. 11.

    Studies on alleles and individualism–collectivism have used both the Hofstede and Gelfand measures.

  12. 12.

    Note that the sample size is larger than for the OLS regressions because the pathogen variable is available for more countries than the individualism variable. In the first stage regression, I regress individualism on the pathogen prevalence index and log GDP per capita; F-statistics are reported in the table and are high in all specifications. In the second stage, I regress the distribution variable on the fitted values from the first stage and log GDP per capita—this stage includes countries for which the pathogen measure is available but the individualism measure is not. However, results are similar if I only include observations for which all first- and second-stage variables are available.

  13. 13.

    See documentation at http://www.worldvaluessurvey.org/WVSDocumentationWV6.jsp.

  14. 14.

    Principal component analysis is an algorithm that reduces dimensionality while retaining as much variation as possible (Jolliffe 2002). The first principal component is a linear combination of the variables; the scoring coefficients appear in Table 6.

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Correspondence to Carola Conces Binder.

Appendix: Survey Questions from Hofstede and Summary Statistics

Appendix: Survey Questions from Hofstede and Summary Statistics

Hofstede (2001) Exhibit 5.11 lists the following questions used to construct the cultural dimension measures:

How important is it to you to...

  1. 1.

    Have challenging work to do—work from which you can get a personal sense of accomplishment [challenge].

  2. 2.

    Live in an area desirable to you and your family [desirable area].

  3. 3.

    Have an opportunity of high earnings [earnings].

  4. 4.

    Work with people who cooperate well with one another [cooperation].

  5. 5.

    Have training opportunities (to improve your skills and to learn new skills) [training].

  6. 6.

    Have good fringe benefits [benefits].

  7. 7.

    Get recognition you deserve when you do a good job [recognition].

  8. 8.

    Have good physical working conditions (good ventilation and lighting, adequate work space, etc.) [physical conditions].

  9. 9.

    Have considerable freedom to adapt your own approach to the job [freedom].

  10. 10.

    Have the security that you will be able to work for your company as long as you want to [employment security].

  11. 11.

    Have an opportunity for advancement to higher level jobs [advancement].

  12. 12.

    Have a good working relationship with your manager [manager].

  13. 13.

    Fully use your skills and abilities on the job [use of skills].

  14. 14.

    Have a job which leaves you sufficient time for your personal or family life [personal time].

  15. 15.

    Have the security that you will not be transferred to a less desirable job [position security].

  16. 16.

    Work in a department which is run efficiently [efficient department].

  17. 17.

    Have a job which allows you to make a real contribution to the success of your company [contribute to company].

  18. 18.

    Work in a company which is regarded in your country as successful [successful company].

  19. 19.

    Work in a company which stands in the forefront of modern technology [modern company].

  20. 20.

    Work in a congenial and friendly atmosphere [friendly atmosphere].

  21. 21.

    Keep up to date with the technical developments relating to your work [up-to-dateness].

  22. 22.

    Have a job on which there is a great deal of day-to-day learning [day-to-day learning].

  23. 23.

    Have little tension and stress on the job [stress-free].

  24. 24.

    Be consulted by your direct supervisor in his/her decisions [consulted].

  25. 25.

    Make a real contribution to the success of your company or organization [contribute].

  26. 26.

    Serve your country [country].

  27. 27.

    Have an element of variety and adventure in the job [variety].

  28. 28.

    Work in a prestigious, successful company or organization [prestige].

  29. 29.

    Have an opportunity for helping other people [helping].

  30. 30.

    Work in a well-defined job situation where requirement are clear [clear job].

See Table 8.

Table 8 Summary statistics

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Binder, C.C. Redistribution and the Individualism–Collectivism Dimension of Culture. Soc Indic Res 142, 1175–1192 (2019). https://doi.org/10.1007/s11205-018-1964-6

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Keywords

  • Inequality
  • Redistribution
  • Culture
  • Individualism
  • Collectivism
  • Social norms
  • Values

JEL Classification

  • D30
  • D31
  • D63
  • Z10
  • O15