Thierry Verdier

The economics of cultural transmission and the dynamics of preferences

This paper studies the population dynamics of preference traits in a model of intergenerational cultural transmission. Parents socialize and transmit their preferences to their offspring, motivated by a form of paternalistic altruism (“imperfect empathy”). In such a setting we study the long run stationary state pattern of preferences in the population, according to various socialization mechanisms and institutions, and identify sufficient conditions for the global stability of an heterogenous stationary distribution of the preference traits. We show that cultural transmission mechanisms have very different implications than evolutionary selection mechanisms with respect to the dynamics of the distribution of the traits in the population, and we study mechanisms which interact evolutionary selection and cultural transmission. Journal of Economic Literature Classification numbers: D10, I20, J13.

“Beyond the Melting Pot”: Cultural Transmission, Marriage, and the Evolution of Ethnic and Religious Traits

This paper presents an economic analysis of the intergenerational transmission of ethnic and religious traits through family socialization and marital segregation decisions. Frequency of intragroup marriage (homogamy), as well as socialization rates of religious and ethnic groups, depend on the groups share of the population: minority groups search more intensely for homogamous mates, and spend more resources to socialize their offspring. This pattern generally induces a dynamics of the distribution of ethnic and religious traits which converges to a culturally heterogeneous stationary population. Existing empirical evidence bearing directly and indirectly on the implications of the model is discussed.

Oligarchy, democracy, inequality and growth

This paper analyzes the dynamics of inequality, democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation. In a context with imperfect capital markets, we investigate the incentives for an educated oligarchy to subsidize the poors education and to initiate a democratic transition. We characterize the equilibrium patterns of political institutions, income distribution and growth as a function of the initial income and inequalities. In particular, we identify circumstances under which the Elite promotes the endogenous emergence of a middle class for purely political economy reasons. A simple linear infinite horizon framework is then presented. In this setting, we discuss the importance of historical dependence for long-run social stratification and redistribution.

Education, Democracy and Growth

This paper constructs a model where redistribution, determined by a political equilibrium, is in the form of public education. Public education is favourable for growth because it increases the level of human capital and at the same time it tends to produce a more even income distribution. The model is solved in the presence or absence of distortionary taxation. The main results are that for a given structure of political rights, more inequality may be good for growth if it implies more political support for education; increased political rights are good for growth and also imply a more equal income distribution; growth and inequality tend to decrease along the convergence path in the absence of political or distributional shocks. If distortions are important, these results may be qualified and one may obtain a hump-shaped relation between inequality and growth.

Kleptocracy and Divide-and-Rule: A Model of Personal Rule

Many developing countries have suffered under the personal rule of kleptocrats, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in part, on their ability to use a divide-and-rule strategy, made possible by the weakness of institutions in these societies. Members of society need to cooperate in order to depose a kleptocrat, yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move, and redistributing the benefits to those who need to agree to it. Thus the collective action problem can be intensified by threats which remain off the equilibrium path. In equilibrium, all are exploited and no one challenges the kleptocrat. Kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents; when opposition groups are shortsighted; when the average productivity in the economy is low; and when there is greater inequality between producer groups (because more productive groups are more difficult to buy off). (JEL: O12, H00) Copyright (c) 2004 The European Economic Association.

The Political Economy of Clientelism

In this paper, we argue that the political-commitment problem provides an explanation for why much income redistribution takes an inefficient form, particularly employment in the public sector. A job is a credible way of redistributing when it provides rents (such as in situations with moral hazard), and employment is optimal ex post. Moreover, a job is selective and reversible, and thus ties the continuation utility of a voter to the political success of a particular politician. We show that the need to make offers of employment incentive-compatible leads to inefficiencies in the supply of public goods. We also show that such inefficient redistribution becomes relatively attractive in situations with high inequality and low productivity. Inefficiency is increased when the stakes from politics are high, when inequality is high, and when money matters less than ideology in politics.

A Theory of Defensive Skill-Biased Innovation and Globalization

This Paper considers a dynamic model of innovations in which firms can endogenously bias the direction of technological change. Both in a North-North and North-South context, we show that, when globalization triggers an increased threat of technological leapfrogging or imitation, firms tend to respond to that threat by biasing the direction of their innovations towards skilled labour-intensive technologies. We show that this process of defensive skill biased innovations generates an increase in wage inequalities in both regions. We then discuss suggestive empirical evidence of the existence of defensive skill biased technical change.

Religious Intermarriage and Socialization in the United States

This paper presents an empirical analysis of a choice‐theoretic model of cultural transmission. In particular, we use data from the General Social Survey to estimate the structural parameters of a model of marriage and child socialization along religious lines in the United States. The observed intermarriage and socialization rates are consistent with Protestants, Catholics, and Jews having a strong preference for children who identify with their own religious beliefs and making costly decisions to influence their children’s religious beliefs. Our estimates imply dynamics of the shares of religious traits in the population that are in sharp contrast with the predictions obtained by linear extrapolations from current intermarriage rates.

Transition and the Output Fall

This paper presents a model that explains why in the transition economies of Central and Eastern Europe an important output fall has been associated with price liberalization. Its key ingredients are search frictions and Williamsonian relation-specific investment implying that new investments are made only after a new long-term partner has been found. When all firms search for new partners, output may fall because of three effects: a) disruption of previous production links; b) a fall in investment; and c) capital depreciation due to the absence of replacement investment. We show that forms of gradual liberalization like the Chinese ‘dual-track’ price liberalization may avoid or reduce the transitory output fall.

The Economics of Cultural Transmission and Socialization

Cultural transmission arguably plays an important role in the determination of many fundamental preference traits (e.g., discounting, risk aversion and altruism) and most cultural traits, social norms, and ideological tenets ( e.g., attitudes towards family and fertility practices, and attitudes in the job market). It is, however, the pervasive evidence of the resilience of ethnic and religious traits across generations that motivates a large fraction of the theoretical and empirical literature on cultural transmission. This article reviews the main contributions of models of cultural transmission, from theoretical and empirical perspectives. It presents their implications regarding the long-run population dynamics of cultural traits and cultural heterogeneity, the worlds geographical fragmentation by ethic and religious traits, at any given time. Finally, the paper reviews the empirical literature which estimates various properties of cultural transmission mechanisms as well as the population dynamics of specific traits.