Individualism, collectivism, social capital, and economic development

This article systematizes the main distinguishing features of the interactions between business agents in individualistic and collectivist cultures. It offers a brief summary of the debate in the literature on the relationship between culture and economic development and justifies the productivity for the economic analysis of a good knowledge of the peculiarities of national cultures. The review necessarily includes evidence and arguments for the existence of mechanisms through which the deep aspects of culture influence the economic outcomes; this is achieved through the formation of beliefs and preferences, which is demonstrated vividly through the effects of social capital. Some of the apparent contradictions in the hypotheses presented can be resolved by taking into account the scope of the group to which the collective identity and perceived shared responsibilities extend. This leads to the main conclusion of the analysis, namely that the type of collectivism that hinders economic development usually consists in loyalty to too small a group of people.