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Understanding the Individualism-Collectivism Cleavage and its Effects:
Lessons from Cultural Psychology.
Yuriy Gorodnichenko Gerard Roland
University of California, Berkeley and NBER University of California, Berkeley and CEPR
Abstract: In this paper, we survey our recent work showing theoretically and empirically a link between individualist culture on one hand and long run growth and innovation. The individualism-collectivism cultural dimension is the only one that has a robust effect on measures of long run growth. We survey the cross-cultural psychology culture that finds that the individualism-collectivism cleavage is also the most important one in that literature. We discuss some of the implications of the lessons from the psychology literature on the economic and institutional effects of the individualism-collectivism cleavage.
1. Introduction
The central role of culture on economic development has been recognized at least since Max Weber who, in his classical work “The Protestant Ethic and the Spirit of Capitalism,” argued that the protestant ethic of Calvinism was a very powerful force behind the development of capitalism in its early phases. Recently economic historians such as Landes (1998) and Mokyr (2010) have emphasized the crucial role of culture in explaining the industrial revolution. Culture is now commonly defined as the set of values and beliefs people have about how the world (both nature and society) works as well as the norms of behavior derived from that set of values. Given that definition, culture is considered to affect not only social norms but also economic behavior such as the propensity to save or to innovate, fertility choices, labor supply decisions, investment in education, charitable contributions or the willingness to contribute to public goods. Culture is directly related to institutions in the sense that culture, like formal political or legal institutions as defined by North (1990), imposes constraints on individual behavior. Much recent work on culture has emphasized the contrast between generalized and limited morality (see e.g. Tabellini, 2008). Generalized morality means that individuals support a set of social norms that are valid for all citizens in a given society, without excluding any particular group of people. Generalized morality is based implicitly on the notion that all humans have equal rights and duties and share a set of universal values. Limited morality in contrast views given norms of morality valid only within a given group such as the extended family, the clan or the tribe. When interacting with people outside one’s extended family, these social norms do not apply and opportunistic and amoral behavior is considered morally acceptable and justified. The notion of limited morality goes back to the notion of “amoral familism” coined by Banfield (1958) in his study of life in a village in Southern Italy where he was struck that notions of good and bad applied only within the family but not in relation to those outside the family. The empirical measure of generalized morality used in the literature (see in particular Tabellini, 2008,
development. Specifically, he documents that productive individuals are seen with suspicion and are coaxed into sharing their surplus with the community. Collective punishments exist to penalize the rich. They take the form of social ostracism, loss of status, or even violence. Communities have for example frequently used accusations of witchcraft to punish greed and acquisitiveness as well as aspirations to move to other places. Behind these punishments is the fear that the community’s cohesiveness will be undermined and that an individual who proves more successful will leave the village or will not redistribute any surplus food or production. Baland et al. (2007), Comola and Fafchamps (2010) and Jakiela and Ozier (2011) show how, in African villages, people who have accumulated some savings want to keep this information hidden from others and are even willing to pay to keep their savings hidden from others in their community. The best known international measure of individualism and collectivism is that developed by Hofstede (2001) who used surveys of IBM employees in about 30 countries. The idea was to survey people with equivalent jobs in different countries in the same company so as to measure cultural differences. To avoid cultural biases in the way questions are framed, the translation of the survey into local languages was done by a team of English and local language speakers. With new waves of surveys and replication studies, Hofstede’s measure of individualism has been expanded to almost 80 countries.^1 Hofstede’s index, as well as the measure of individualism from other studies, uses a broad array of survey questions to establish cultural values. Factor analysis is used to summarize data and construct indices. In Hofstede’s analysis, the index of individualism is the first factor in questions about the value of personal time, freedom, interesting and fulfilling work, etc. This component loads positively on valuing individual freedom, opportunity, achievement, advancement, recognition and loads negatively on valuing harmony, cooperation, relations with superiors. In summary, the Hofstede individualism score measures the extent to which it is believed that individuals are supposed to take care of themselves as opposed to being strongly integrated and loyal to a
(^1) The most current version of the data is available at http://www.geert-hofstede.com/.
cohesive group. Individuals in countries with a high level of the index value personal freedom and status, while individuals in countries with a low level of the index value harmony and conformity. Although Hofstede’s data were initially collected mostly with the purpose of understanding differences in IBM’s corporate culture, the main advantage of this measure of individualism is that it has been validated in a number of studies.^2 For example, across various studies and measures of individualism (see Hofstede (2001) for a review) the United Kingdom, the USA and Netherlands are consistently among the most individualist countries, while Pakistan, Nigeria and Peru are among the most collectivist. Figure 1 represents a world map of Hofstede's individualism scores. INSERT FIGURE 1 A closely related data base is the one established by cross-cultural psychologist Shalom Schwartz, built with the purpose of establishing a core set of values that have a common cross-cultural meaning. Schwartz (1994, 2006) gathered survey responses from K-12 schoolteachers and college students for a total of 195 samples drawn from 78 nations and 70 cultural groups between 1998 and 2000. Each sample generally consists of 180-280 respondents for a total of over 75,000 responses. Schwartz’s value survey consists of 56-57 value items that ask respondents to indicate the importance of each as “a guiding principle in my life.” These items have an equivalent meaning across cultures and are then used to create cultural mappings. In particular, similarly to the individualist-collectivist dimension of cultures in Hofstede (2001), Schwartz differentiates cultures along the autonomy and embeddedness dimensions. In autonomous cultures, people are viewed as autonomous, bounded entities. They are encouraged to cultivate and express their own preferences, feelings, ideas, and abilities, and to find meaning in their own uniqueness by pursuing their own ideas and intellectual directions independently (intellectual autonomy) and by pursuing positive experiences for themselves (affective autonomy). In contrast, meaning in life for people in embedded cultures comes largely through social relationships, through identifying with the
(^2) See for example Hoppe’s (1990) study among members of parliaments, labor and employer leaders, academics and artists in 18 countries, Shane’s (1995) study across 28 countries for Merrit’s (2000) study on commercial airline pilots in 19 countries, de Mooij’s (2003) survey among consumers in 15 international companies other than IBM, European countries and van Nimwegen’s (2002) research among employees of ABN-AMRO bank in 19 countries.
coordinated actions easier. Production of the final goods is also greater when the quality of intermediate inputs is higher. The intermediate goods sector is populated by entrepreneurs who produce differentiated, imperfectly substitutable inputs for the production of final goods. Entrepreneurs derive utility not only from consumption but also from social prestige associated with producing a higher than average quality of intermediate products. This social prestige is stronger in individualist cultures than in collectivist cultures. The quality of intermediate inputs is determined by the effort put into research, which in turn is a function of the monetary and social status rewards to innovation.
In this simple theoretical setting, we find ceteris paribus that while collectivism’s increased coordination capacities leads to higher efficiency in the economy, individualism results in higher innovation because of the social status rewards to innovation. As a result, the higher innovation rate eventually leads to higher levels of productivity and output in the long run compared to a collectivist culture. In other words, while the advantages of collectivism affect static efficiency in the economy, the advantages of individualist culture affect dynamic efficiency and thus long run growth. Note that in a Malthusian economy where all resources are devoted to survival consumption, the collectivist economy will exhibit a higher level of output per capita.
The model also yields an interesting relationship between culture and institutions. Under bad institutions, a predatory government can seize the monetary returns from innovation. However, social status and prestige cannot be expropriated. Therefore, even in societies where institutions are relatively predatory, there will be more innovation in an individualist culture because of the social status reward to innovation.
Using Hofstede’s measure of individualism, we regress the log of GDP per worker on individualism and find a strong and significant positive effect of individualism. We report in Gorodnichenko and Roland (2010) that a one standard deviation increase in individualism (say from the score of Venezuela to Greece, or from that of Brazil to Luxemburg) leads to a 60 to 87 percent increase in
the level of income, which is a quantitatively large effect. We also observe strong, positive correlations between individualism and measures of innovation. The results are similar when we use Schwartz’s measures of individualism.
These are not simply correlations. In Gorodnichenko and Roland (2010, 2011), we provide evidence of a causal effect of individualism on innovation and measures of long run growth. We use as instrumental variable for culture the Euclidian distance between the frequency of blood types in a given country and the frequency of blood types in the USA, which is the most individualist country in our sample. The genetic data originate from Cavalli-Sforza et al. (1994), providing measures of genetic markers for roughly 2,000 groups of population across the globe. These data contain allele frequencies (alleles are variants taken by a gene) for various ethnic groups. We aggregate these data to country level using ethnic shares of population from Fearon ( 2003 ). We use these genetic data as an indirect measure of cultural transmission. Parents transmit their culture to their children but also transmit their genes. We do not have a direct measure of the former but we do have measures of the latter. Our blood distance measure should thus be seen as a proxy measure of cultural transmission.
Why can blood distance be a good instrumental variable? As we discuss in Gorodnichenko and Roland (2010), blood types are a neutral genetic marker and thus, it is hard to argue that differences in blood types can explain why some countries are richer than others. Neutral genetic markers are by definition not affecting general fitness and thus should satisfy the exclusion restriction as they have no direct effect on economic productivity. While genes might not in general satisfy the exclusion restriction, blood types, as neutral genetic markers, will. Note also that blood types are not known to be correlated with alleles that affect ability to work, think, etc. If blood types were able to affect fitness, there would be what geneticists call “linkage disequilibrium”. The choice of blood type distance as an instrument should thus plausibly satisfy the exclusion restriction. If our genetic distance measure correlates well with our individualism score, then we will have a useful instrument. This is indeed the case and there is a strong negative correlation between blood distance on one hand and the individualism score of Hofstede.
Finally, we use recent advances in cross-cultural psychology, which provides some direct evidence of an effect of genes on culture, to verify the causal effect of individualism on long run growth. Three separate research strands can be brought together here. First of all, it has been found that collectivism is stronger in countries where a higher percentage of people have a short (S) allele in the polymorphism 5-HTTLPR of the serotonin transporter gene SLC6A4, putting them at greater risk for depression when exposed to life stressors. Second, collectivism is also stronger in countries with a higher
frequency of the G allele in polymorphism A118G in the -opoid receptor gene, leading to higher stress in case of social rejection. Third, collectivism is also stronger in countries with a historically higher pathogen prevalence, i.e. in countries that were historically more prone to a number of contagious diseases. Studies establishing these links emphasize that collectivism provides strong psychological support networks to deal with depression and stronger protection from social rejection. Similarly, more collectivist values emphasizing tradition and putting stronger limits on individual behavior, and showing less openness towards foreigners provide protection against disease spread. Using these three variables in turn as instruments, we find robust and significant effects of individualism on log output per worker. It might be less clear a priori whether these variables satisfy the exclusion restriction. However, when we use each of these instrumental variables jointly with our other instrumental variable of blood distance, the overidentifying restriction tests cannot reject the exclusion restriction and thus, at least on statistical grounds, we cannot reject the validity of these additional instrumental variables.
To summarize, our research has found a strong and robust causal effect of individualism on innovation and long run growth. Other cultural variables do not appear to play a significant role. Thus, culture is important in understanding long run growth but the difference between individualism and collectivism appears to be the most important dimension that is relevant to understand differences in level of development. The rich literature in cultural psychology may help us understand better the content of the individualism-collectivism cleavage.
4. Lessons from cultural psychology
In cultural psychology, the differences between individualism and collectivism have deep roots that affect different forms of behavior: they relate to different visions of self, differences in cognitive behavior, behavioral and motivational differences as well as relational differences. A large literature covers these issues.
Different visions of self. The perception of Self is fundamental to human behavior. It is rooted in interactions with others and in the seizing of meanings from interacting with one’s social environment. According to Markus and Kitayama (1991), the roots of the individualism-collectivism cultural cleavage can be found in fundamentally different perceptions of Self. They distinguish between the independent and the interdependent self, where the former is associated to individualism and the latter to collectivism.
The independent self derives its identity only from the inner attributes of the individual. These attributes are considered to reflect the essence of the individual, to be stable across time and context and the combination of these attributes is seen as unique to the individual. These individual inner attributes are significant for defining, regulating and thus predicting the behavior of an individual. The interdependent self, in contrast derives its identity essentially from relations with others. The Self is not a separate identity but is embedded in a larger social group and can be understood only in relation to that larger group. From the point of view of the interdependent self, individual behavior is derived from one’s role in different social contexts and from the perception of others’ reaction to one’s behavior as well as from the perceived effect of one’s own actions on others.
These different self-perceptions are not merely abstract conceptual categories. They have been documented extensively in cross-cultural psychological research. For example, in surveys, individuals from individualist countries (the US, UK, Australia, Canada, Sweden, etc.) describe themselves through
Different concepts of the self lead to differences in the degree of self-consistency. The independent self puts great emphasis on self-consistency and considers the latter important for self-esteem, even if it comes at the cost of rigidity. Indeed, absence of self-consistency would signal a flawed self which would be hurting self-esteem. In contrast, the interdependent self emphasizes adjustment to contexts and flexibility at the cost of self-consistency. It is this adaptability that is crucial for self-esteem, in line with the concept of interdependent self. Studies have shown that Japanese self-descriptions of self depend on who is present in the room but American self-descriptions do not (Kanawaga, Cross and Markus, 2001). For example, Japanese students tend to be more self-critical when a professor is present. Koreans change their self-description depending on a situation they are presented with (being with parents, romantic partner, professor, friends, etc.) but not Americans (Suh, 2002). As a consequence of these differences, East Asians are more ready to endorse contradictory views of their personality (for example introverted and extraverted at the same time) (Choi and Choi, 2002) as well as more contradictory beliefs about reality (naïve dialecticism, see Peng and Nisbett, 1999).
People from individualist cultures also have a higher need for “self-enhancement” and have a stronger self-serving bias than people from collectivist cultures. The need for self-enhancement means that one is motivated to see oneself in a more positive light. Indeed, discovering bad traits in oneself is more damaging for the self-esteem of the independent self because these traits will be seen as inherent to the personality. In contrast, the need for self-enhancement is less strong for the interdependent self who views him/herself as much more malleable. Studies have shown that the more collectivist Mexicans, native Americans, Chileans and Fijians have less positive self-views than Westerners (see the studies cited in Heine, 2010). In a similar spirit, East Asians have much less of a self-serving bias than Westerners (Mezulis et al. 2004).
Another implication of differences in the concept of self is related to what is called primary and secondary control. Primary control relates to actions to change the world whereas secondary control relates to actions to adjust oneself to the surrounding world. In the individualist culture, the independent
self is stable and the world is malleable. Individuals will thus engage in primary control strategies to achieve their goals and wishes. In contrast, in the collectivist culture, the interdependent self is malleable whereas the world in stable. Individuals will thus tend to engage in secondary control strategies by controlling the psychological impact of reality on them instead of attempting to change reality. Studies have shown that Americans tend to report more primary control experiences than the Japanese but feel less powerful and proud about their adjusting experiences than the latter (Morling et al. 2002).
Emotional responses differ also in line with differences in the concept of the self. The interdependent self is concerned more with interpersonal harmony whereas the independent self is concerned with how events affect the individual and helps him or her stand out. For example, among Japanese more positive feelings are reported that are associated to interpersonally-engaged emotions (respect, friendly exchanges) whereas Americans report more positive feelings associated to interpersonally disengaged emotions (pride, feeling superior) (Kitayama et al., 2000). These differences in emotional responses are also reflected in a higher correlation between life-satisfaction scores and respect for social norms in more collectivist cultures (Suh et al. 1998).
Analytic and holistic thinking. Different visions of the Self are associated to different cognitive modes. Individualist culture is associated to analytic thinking whereas collectivist thinking is associated to forms of holistic thinking. The independent self naturally tends to focus on objects perceived as existing independently from their context and understood in terms of their “essence” or their underlying attributes. These attributes are then used for classification. Abstract rules are derived for predicting the behavior of objects based on their internal attributes. The perception of the environment follows thus essentially the same logic as the perception of self. This kind of analytical thinking goes back at least to Plato. The interdependent self in contrast naturally looks at the relations between objects, the environment and the context and focuses less on objects themselves.
young children are nouns. Since this phenomenon was widespread among English-speaking children, it was even thought that this was a universal phenomenon. A possible justification is that nouns are concrete and more easily learned. However, studies found that this “noun bias” is not present among Chinese and Koreans. Chinese toddlers tend even to learn more verbs than nouns (Tardif, 1996). Another phenomenon that was thought to be universal is the fundamental attribution error: the tendency to explain behavior excessively by someone’s intrinsic attributes rather than by the situation involved. It turns out that there is now a body of evidence showing that this bias is not present in collectivist cultures where the situation is taken more into account than the dispositions of individual (see e.g., Norenzayan et al. 2002).
Another difference is that people from individualist cultures pay more attention to the literal explicit meaning of words whereas people from collectivist cultures pay attention to the implicit meaning of words as well as expressed from the tone and the body language. For example, Miyamoto and Schwarz (2006) found that Japanese use answering machines less than Americans because the non verbal feedback present in a normal telephone conversation is absent.
Behavioral and motivational differences There are a number of behavioral differences that derive from the different cultural perceptions of the self. One relates to differences in effort provision by individuals. According to the view of the independent self, the fundamental attributes of the individual do not vary much over his or her lifetime whereas according to the view of the interdependent self, the individual is much more malleable and can change and improve through individual effort. In collectivist cultures, the response to a failure will thus tend to be to provide more effort so as to achieve success. One example would be taking more remedial courses in response to bad class grades. In a collectivist culture, individual achievements are seen as resulting more from effort more than from ability. In contrast, in individualist cultures, there is much more emphasis on individual ability as a cause of success. The response to failure will thus be more to look for an alternative task or occupation that is better suited to one’s innate talents. Psychological
experiments have not only established these differences in behavior but have also established some interesting implications. Individuals from collectivist cultures can for example be manipulated into thinking that ability is important for a task, which will not be the case for subjects from individualist cultures who think that way already. Symmetrically, individuals from individualist cultures, but not from collectivist cultures, can be manipulated into thinking that effort is important for a task (Heine et al. 2001).
A key motivational difference between individualist and collectivist culture is the need to stick out versus to fit in. Both motivations are present everywhere but the former is stronger in individualist than in collectivist cultures where the motivation to fit in is stronger in the latter relative to the individualist culture. This difference has been tested in numerous experiments (see e.g. Kim and Markus, 1999). For example, Americans and East Asians where given the choice of a pen. A majority of pens were from one color and a minority of pens were from another color. Americans tended to choose a pen with the minority color whereas East Asians tended to choose a pen with the majority color. Similarly, when asked to rate different types of shapes, Americans tend to rate the unusual and rare shapes as more desirable whereas East Asians tend to rate the more common shapes as more desirable. These behavioral differences tend to be exploited by advertisers. Advertisements targeting Americans show how buying an object will make them unique whereas advertisements targeting East Asians will emphasize how buying an object will make one conform to others (see the empirical evidence in Kim and Markus, 1999).
Motivational differences extend to choice-making in general. The independent self emphasizes autonomy of choice without taking others into account whereas the interdependent self is more concerned with goal groups and is more willing to adjust his or her behavior for a better coordination of the group with which he is associated. For example, in collectivist cultures, an individual’s choice of a spouse or a job is more often made by the family than by the individual compared to individualist cultures. Studies have shown that European-American children prefer the tasks they chose themselves whereas Asian- American children prefer tasks chosen for them by members of their close community but react
a form of reciprocal exchange. It is formed and maintained if it is mutually beneficial and it can be dissolved if it seizes to be beneficial to one or the parties. Existing relationships are by definition rewarding so people change relationships depending on their evolving circumstances and interests. In the collectivist culture however, one is born into a fixed relational network towards which one has obligations. Because of this, one will not tend to join new interpersonal networks. Because of the obligations towards existing networks, existing relationships are then often less rewarding. This is a side effect of the largely non voluntary character of people’s relational network.
To summarize, there is a large body of research in cross-cultural psychology documenting the differences between individualist and collectivist culture covering differences in the view of the world, differences in cognition, motivational and behavioral differences. Scholars working in the field suggest that the individualism-collectivism cleavage is indeed the main cultural cleavage observed. Table 1 summarizes the differences between individualism and collectivism studies in cross-cultural psychology.
INSERT TABLE 1 The question is raised of what are the possible differences between individualism and collectivism that may have economic relevance. The research in Gorodnichenko and Roland (2010) suggests that it is relevant in terms of cultural incentives to innovate. We end this section by discussing possible implications of the cross-cultural psychology research on economic performance. This is done with the help of Table 2.
INSERT TABLE 2 The advantage of individualism in innovation in Gorodnichenko and Roland (2010) can be revisited to grasp its psychological foundations. The need to stand out and the social status rewards associated with individual achievement derived from the independent self and the need for self-enhancement. Individuals see in these achievements a confirmation of their exceptional personality traits and talents and this is why they are motivated to discover these traits through their achievements. Other people who share the same
culture will admire these achievements and consider them to result from extraordinary personalities. This is how individual achievements give social status. The drive towards individual achievement is less pressing in the collectivist culture where the drive towards conformity takes instead an overwhelming importance. The stronger an individual’s ability to conform, the more he or she can be proud of his or her own malleability and the effort invested in achieving excellence in serving the group’s goals. This ability will be recognized and admired by the group, delivering social status rewards to the individual.
The difference between individualism and collectivism in the drive towards individual achievement versus conformity should in principle affect comparative advantage and specialization in international trade. Countries with more individualist cultures should become specialized in sectors that are innovation- intensive whereas countries with more collectivist cultures should specialize in sectors that are more coordination-intensive, i.e. where production requires a complex assembly process and success in coordination of multiple activities is a key prerequisite of efficient plant operation. Preliminary research that we did in this direction tends to confirm the existence of these types of comparative advantage linked to individualism and collectivism.
There are other implications that are important from the point of view of institutions. A first, very natural implication, is that in an individualist culture, property should be individual whereas in an collectivist culture, it should be more group-based. This distinction has been made by English historian MacFarlane who found that the culture of individualism existed in England as early as the thirteenth century and maybe earlier. One of the main pieces of evidence brought by Macfarlane is that property of land in medieval England belonged to individuals not families, in contrast to what was the case at the time in continental Europe for example. Parents had the right to disinherit their children, women enjoyed property rights which was then very rare in the world. Land was more frequently than anywhere else sold rather than transmitted to the children and economic relations were more monetized than was the case in other countries. The basic family structure was already the nuclear family and links to the local
