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Culture is a very broad term; we need to define it as specific as possible in order to examine its effect on economic development. Relation between culture and economic dynamics has been discussed by various authors and from different perspectives. Max Weber, the German social scientist, concluded that religious values are clear example of cultural differences could impact economic output. Culture has a direct impact on behavior of people.
Culture relates to economic development is as a dimension of social capital, social institutions and social capability. The paper contributes to the interpretation of annual growth rates based on the effect of the basic growth factors (capital, labor, human capital) and the cultural background as part of the “remaining factors”. It uses a series of variables to express these effects, Cultural background variables are divided in two main groups: “Efficiency Orientation” and “Social Orientation” variables. “Efficiency Orientation” variables significantly affect economic growth, while “Social Orientation” influences are unpredicted in principle. The results confirm that cultural background has strong interpretive role and its positively affects annual growth rates.
“Social Orientation” has positive power for annual growth rates. Paper focus on cultural background as an influential element of growth, which can be considered a “remaining factor” Whether directly or indirectly, culture influences the outcome of economic process. Culture may be considered as the sum of the values, and perceptions dominating a group of people. Culture understood as a dimension of social capital A growing literature considers social attitudes, such as trust, as one of the main determinants of current economic development. In this regard, trust and trustworthiness appear as the keystone for successful economic development. A nation can’t ignore culture as a factor of development .The United States of America said to be where they are today as a result of management and development of their cultural values. So economist believe that culture has impact on economic development but how much it affects economic development, is still a debate among the economists. Economist consider trust as the first element of economic culture which might affect the economic outcome.
Trust is an essential factor for economic activity. Trust makes investors, policy makers and consumers willing to take part in transactions with each other, which rise the spending, investing which ultimately increase growth. Peoples work harder to achieve their goals Economic success or failure results from people actions. if individuals have higher levels of control, the overall economic development level raises in the economy. Respect,also considered as the cultural dimension. The higher respect level encourage outsider to trade which leads to higher economic development level. Culture plays a role in economic development. Cultural elements may not fully explain the whole relation, but they are relevant. Whether directly or indirectly, culture influences the outcome of economic process and cultural change effects growth of economy.
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