Valér Veres (p), József Benedek

Aleksandra Wrona

Starting from the inequalities of regional economic and social development in Romania, this article aims to study regional differences in the dimensions of cultural values, starting from Hofstede and completed with generalized trust, and their role in subjective income. From a methodological point of view, the study considers bivariate and multivariate statistical analyses on the definition of the dimensions of cultural values through which we can study regional differences in Romania. The territorial units aggregated for the analysis were created through cluster analysis in which we used more than 20 economic and social development variables.
The paper also seeks an answer to the question of explanatory factors of the material subjective income situation at the individual level, and here, we test the role of cultural indices such as generalized trust, uncertainty avoidance, and power distance.
Comparative studies at the European level have shown (see Van Schaik 2002, 2005, Rimac–Štulhofer 2004, Hauser–Tappeiner–Walde 2015) that Romania and other countries with similar levels of development in 1999/2000, such as Bulgaria, Croatia, Latvia, Slovakia, Bulgaria, and Turkey, have an extremely low generalized trust index, especially in the European context. Thus, we hypothesized that differences in economic and social development in Romania may be associated with significant differences in the level of generalized trust at the individual level.
Additionally, as Putnam (1993) pointed out, large regional differences in economic development have cultural roots, especially if they are also deduced by significant historical differences in political culture, power relations and institutional culture, as is the case in Italy between North and South but also in Romania, if we look at multicentury cultural-political influences (Austrian, Ottoman, Tsarist).
Accordingly, we hypothesize that (1) regional differences in economic-social development in Romania can be explained, to some extent, by different levels in patterns of psycho-cultural values, especially uncertainty avoidance, power distance and generalized trust. (2) At the level of individual values, the material situation of individuals/households can also be explained by different relations to power (distance), trust or uncertainty, beyond the usual sociodemographic characteristics, but the role of education cannot be minimized in this case.

Annie Tubadji, Yue Dai (p), Wayne Thomas

Valér Veres

Consumption of luxury goods is a prominent feature in modern China. This behaviour is termed conspicuous and can be seen as a way to create social capital, in order to promote and spread one’s innovative ideas. However, regional local culture could serve as a hindrance to innovation across Chines. Thus in this paper, our hypothesis is that the conspicuous consumption might be a positive cultural impact on innovation. To operationalize this hypothesis, we rely on using the measure of cultural entropy, which quantifies the variability between locally closed cultural milieu and locally open cultural milieu. Places with lower cultural entropy, where one type of milieu prevails, are expected to be more against and restricted in nature. Hence, we test whether places with lower entropy would see more conspicuous consumption which is aimed at surmounting the local hindrance. We use a panel dataset for 31 Chinese regions for the period 2013 – 2019. Our results confirm that conspicuous consumption is triggered by low cultural entropy and in the same time it is beneficial for local innovation. However, we have reasons to question whether the quality of innovation is at highest level if it is promoted by social networking rather than being based on genuine competition based on the quality of the innovative ideas.

Tahar Mjigal (p), Annie Tubadji, Thomas Wayne, Randal ICE

Yue Dai

Behavioral finance explains the beliefs, preferences, and cognitive limits of investors based on
psychologically valid assumptions. However, it is
unknown how human emotion impacts the psychology of risk preference in financial planning
and investment asset allocation models. It is even less known how to distinguish between the
idiosyncratic psychological element and the cultural element in the context of emotions about
the investment decisions of individuals.
Namely, modern portfolio theory (MPT), or mean-variance analysis, is a mathematical
framework for assembling a portfolio of assets such that the expected return is maximized for a
given level of risk (Markowitz, 1952). Why does empirical evidence suggest investor choice
deviates from the optimality of MPT (Basu, 1977; Das et al., 2010; Shiller, 2003; Wermers,
2000)? The Behavioral Portfolio Theory (BPT) attempts to explain the inconsistency between
the mean-variance optimization portfolios and actual investor decisions and actual market results by assuming that investors do not solely seek to maximize their return for a given level
of risk as in MPT (DeBrouwer, 2009). The Maslowian Portfolio Theory (MaPT) (based on
Maslow’s Hierarchy of Needs) also cannot explain investor choice deviation from mean-variance optimization.
Meanwhile, Culture Based Development has been devising approaches for differentiating
between cultural bias and its impact on emotion from what the idiosyncratic individual
variation of choice is (see Tubadji, Huang, and Webber 2021; Tubadjia and Huang 2023).
The main research question of this study is therefore how human emotion and culture affect
the psychology of risk preference in investors’ financial plans and asset allocation models. To
address this research question empirically, we use Rob Shiller’s notion of narrative
economics and quantify individual cultural capital as a function of their local group context as a
source of the cultural narrative. Thus, we manage to distinguish between the idiosyncratic
preference and the cultural context embeddedness effect from culture and its effect on
emotion. We use data from the University of Michigan Health and Retirement Study with over
19000 individual observations. Employing a hedonic model for saving and retirement planning,
CBD quantification of the factor for cultural bias, individual fixed effects, and using a
combination of cross-sectional and panel data techniques, we demonstrate how part of
individual retirement and saving decision-making is influenced not by personal psychology and
emotion but by their cultural belonging and embeddedness, i.e., the impact from the context
on emotion and financial reasoning.

Annie Tubadji (p)

Tahar Mjigal

A core toy model in Culture Based Development is the model of the demand and supply for cultural attitudes – i.e. the market for cultural valuation. According to CBD, the market for culture is where the individual living attitude demand and the local inherited attitude supply find their most efficient level of affinity to any object or subject in life. The market for culture is theoretically explained as a process of market clearance on the market for cultural valuation from which the price on all other markets is derived. This CBD theory is next empirically illustrated with the case of shifting cultural demand and supply on individual and local level in Iran. Data from the WVS (in its waves 4, 5 and 7) with difference in differences approach and instrumental variable related to changing mosques attendance and numbers of historic mosques in the locality where one is born. Difference in differences and instrumental variable approach are used to identify the impact from culture. The distinction between individual and local effect is demonstrated through the use of hierarchical modelling. The empirical work validates the theoretical claims of the CBD model of market for cultural valuation and reveals some of its intricacies. The main contribution of this paper is clarifying the evolution over time of the cultural attitude as a source of cultural valuation of the reality per se. While cultural economics has postulated that there is cultural valuation on top of the economic valuation (Throsby 1999) and while we know that cultural taste (for discrimination) plays a crucial role in economic choice (with individual and regional variation (Becker 1955), it is still little known how does the cultural taste emerge and evolve. The current paper sheds some light on the link between these notions from construction and deconstructionist Wittgenstein point of view, and empirically evidences the important dynamics of culture and its evolution over time in relation to the socio-economic reality of interaction and choice. In this context, I importantly bring new evidence on the different challenges and corresponding cultural hysteresis (i.e. disproportional change) that emerges in cultural attitudes across space within the same institutional context (Iran) along the urban-rural divide.