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The relation between institutional and cultural factors in economic development: the case of Indonesia

Published online by Cambridge University Press:  12 June 2012

ROGER SPRANZ ,
ALEXANDER LENGER  and
NILS GOLDSCHMIDT
ROGER SPRANZ
Affiliation:
Leibniz Center for Marine Tropical Ecology (ZMT), Bremen, Germany
ALEXANDER LENGER
Affiliation:
Goethe University, Frankfurt am Main, Germany
NILS GOLDSCHMIDT*
Affiliation:
Munich University of Applied Sciences and Walter Eucken Institute, Freiburg, Germany
*
*Email: nils.goldschmidt@hm.edu
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Abstract:

This paper analyzes the relation of culture, institutions and economic development using the example of Indonesia. The success of economic catch-up development depends essentially on the interconnection between pre-existing informal constraints on the one hand and novel, imported institutions on the other. Hence culture, understood as the interplay between legal rules and non-legal constraints, has to be considered as an important determinant of economic development and growth. In order to adapt economic policies and thereby prevent institutional traps, which may otherwise hinder economic reforms, it is essential to understand culture and the ways in which different cultural factors support or constrain the functioning of formal institutional settings. Applying a cultural approach to economics in the case of Indonesia's economic development allows for the inclusion of complex cultural conditionality of economic behavior and puts special emphasis on the role of politicians as public and cultural entrepreneurs. Altogether, the example of Indonesia demonstrates once more the necessity to apply a cultural approach to the study of catch-up development in a globalized world.

Type
Research Article
Information
Journal of Institutional Economics , Volume 8 , Issue 4 , December 2012 , pp. 459 - 488
Copyright
Copyright © Millennium Economics Ltd 2012

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