Date of Award

Spring 5-15-2018

Author's School

Graduate School of Arts and Sciences

Author's Department


Degree Name

Doctor of Philosophy (PhD)

Degree Type



My dissertation investigates how economic growth is determined in the long run. To do this, I focus mainly on culture and institutions as fundamental growth factors and develop a general theoretical framework in which culture, institutions and growth are all endogenously determined. Using the framework, I highlight the crucial role of interaction between culture and institutions in the long-term growth.

Chapter 1. Endogenous Financial Friction and Growth

The first chapter investigates the role financial frictions play in economic growth. Most existing studies consider an exogenous form of borrowing constraint, the tightness of which is arbitrarily fixed at a certain value over time. As a result, a sufficiently tight constraint has, if any, a permanent growth effect. The main concern of the chapter is that tightness can vary by economic circumstance, and hence, it will change in different stages of economic development. If borrowers’ profits increase along with economic growth, the tightness will be relaxed, leading to an endogenous relaxation of financial frictions. I develop a theory that has this property as a novel feature; I then provide empirical evidence by applying OLS and dynamic panel GMM regressions to support the endogenous relaxation hypothesis. The endogenous relaxation implies that the growth effects of financial frictions are, at best, temporary; therefore financial factors may not be fundamental determinants that underlie the long-term economic growth.

Chapter 2. Culture, Institutions and Growth

The second chapter deals with culture and institutions as fundamental engines of growth. To this end, I develop a theoretical framework in which culture (individualism vs. collectivism), institutions (protection of property rights over innovations), and growth are endogenously and jointly determined. I first summarize and corroborate empirical facts about culture, institutions, and growth to make the model consistent with the empirical findings. The primary mechanism that drives the main conclusions of the chapter is that culture and institutions are strategic complements. I show that there are two steady states with opposing properties. One is a good steady state characterized by strong individualism and secure protection of property rights with high long-run growth. The other one is associated with strong collectivism and poor protection of property rights. The strategic interaction between culture and institutions leads to not only multiple static equilibria (multiple steady states) but also to multiple dynamic equilibria with contrasting properties. The second chapter demonstrates the significance of institutions for the economic prosperity of society, especially over the long run. This conclusion provides motivation for investigating other roles of institutions, which is the focus of the last chapter.

Chapter3. Rent-Seeking, Institutions and Morality

While the second chapter deals with public predation by the government, the third chapter pays attention to rent-seeking as private predation, which has long been an impediment to economic growth. It starts with this question: If rent-seeking is indeed bad for an economy, why does it still prevail in many countries? That is, why did those countries not eliminate rent-seeking activities long ago? This question leads to a consideration of the factors underlying rent-seeking behavior. In this context, I develop a model where rent-seeking activities result in long-lasting poverty through institutions (the degree of enforcement of laws) and the morality of society, both of which are endogenously determined. I show that, in an economy where institutions are selected as a collective choice, institutions which are effective against rent-seeking are more likely to be established in a society with a robust morality.


English (en)

Chair and Committee

Costas Azariadis

Committee Members

Rodolfo Manuelli, Yongseok Shin, Gaetano Antinolfi, Yi Wen,


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