Culture, democracy and regulation
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Culture, democracy and regulation Claudia R. Williamson1 Accepted: 6 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper examines how culture influences business regulation across countries. Empirical analysis reveals that individualistic countries adopt fewer regulations than collectivist countries. This result is independent of political institutions, suggesting that culture directly affects regulation by shaping preferences over economic policy. Individualism’s influence is magnified in democratic countries. These results support a public choice interpretation of regulation where culture may provide an additional check on government’s ability to rent seek via inefficient regulation. Keywords Culture · Individualism · Regulation · Democracy JEL Classification F55 · K22 · L51 · O17 · Z10
1 Introduction The regulation of business varies tremendously across countries. For example, in 2019 it takes 1 day to open a new business in Georgia compared to 230 days in Venezuela. To obtain the necessary legal permits to construct a warehouse, it takes 27.5 days in South Korea, but over 650 days in Cambodia. The costs to resolve insolvency varies from 1% in Norway to 76% of the estate in Central African Republic. In Haiti, it takes 319 days to register property compared to 1 day in Qatar. The cost to enforce a contract in a government court is 9% of the claim’s value in Iceland but 163% in Timor-Leste. Belgium has zero monetary border and documentary compliance costs to import and export goods, whereas the import border compliance cost is $3039 in Democratic Republic of Congo, and in Iraq it costs $1800 in export documentary compliance (World Bank’s Doing Business 2020).
* Claudia R. Williamson Claudia‑[email protected] 1
Scott L. Probasco, Jr. Distinguished Chair of Free Enterprise, Gary W. Rollins College of Business, University of Tennessee at Chattanooga, 434‑D Fletcher Hall, 615 McCallie Ave, Chattanooga, TN 37403, USA
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C. R. Williamson
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Kuwait Singapore Norway Switzerland Netherlands Hong Kong SAR, China United States Bahrain Sweden Germany Italy Canada France Finland Australia Saudi Arabia Cyprus Japan United Kingdom Puerto Rico New Zealand Trinidad Spain and Tobago Slovenia Israel Korea, Rep Malaysia Kazakhstan Czech Republic Hungary Libya Russian Federation Estonia Lebanon Poland Chile Slovak Republic Croatia Romania Mexico Uruguay Iran, Islamic Rep. Turkey Thailand IraqBrazil Algeria Lithuania Tunisia Bulgaria Ecuador South Africa Montenegro Jordan Colombia Latvia Belarus Egypt, Arab Rep. Serbia Peru Dominican Republic Azerbaijan Ukraine Indonesia ElGuatemala Salvador Morocco Georgia Albania Philippines Bosnia and Herzegovina Armenia Uzbekistan China Yemen, Rep. Pakistan Vietnam Nigeria Ghana Moldova India Kyrgyz Republic Zambia Zimbabwe Bangladesh Tanzania Mali Rwanda Burkina Faso Uganda
Venezuela, RB
Ethiopia
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GDP per capita, log, PPP
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Qatar
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Business Entry Regulation
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coef = -0.47, (robust)
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