A theory of strategic uncertainty and cultural diversity

Working paper : Discussion paper

We identify a new mechanism through which cultural diversity affects economic outcomes, based on a model of culture as shared cognition. Under this view, cultural diversity matters because it increases strategic uncertainty. The model can help better understand a variety of disparate evidence, including why homogeneous societies can be more conformist, why diverse societies may get stuck in a low-trust trap, why companies with a strong culture may fail to adopt superior work practices, and why autocratic rulers in diverse societies may overinvest in state capacity.

Authors: Kets, W; Sandroni, A

• Publication status: Published
• Publisher: University of Oxford ; Department of Economics
• Host title: Department of Economics Discussion Paper Series
• Series: Department of Economics discussion paper series
• Publication date: 2020-07-07
• ISSN: 1471-0498
• Paper number: 920
• Language: English
• Keywords: SBTMR
• Subtype: Discussion paper