DP10039 | Incompatible European Partners? Cultural Predispositions and Household Financial Behavior

Publication Date

22/06/2014

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Abstract

The Eurozone fiscal crisis has created pressure for institutional harmonization, but skeptics argue that cultural predispositions can prevent convergence in behavior. Our paper derives a robust cultural classification of European countries and utilizes unique data on natives and immigrants. Classification based on genetic distance or on Hofstede?s cultural dimensions fails to identify a single ?southern? culture but points to a ?northern? culture. Our findings support the relevance of cultural predispositions for financial behavior; and convergence of behavior over time in the face of common institutions, even for countries with great cultural distance from the country that created those institutions.