Individualism-collectivism, governance and economic development

•The individualist-collectivist cultural dimension can affect government quality.•In-group favoritism in collectivist societies can lead to corruption and nepotism.•Individualism's stress on personal achievement supports meritocratic governance.•Individualism contributes to economic development by promoting good governance.

While an individualist society prizes personal control, autonomy and individual accomplishments, a collectivist one puts a premium on loyalty and cohesion and imposes mutual obligations in the context of in-groups. It has been argued that, in contrast to collectivism, individualism will promote economic development directly by sharpening individual incentives to invest, innovate and accumulate wealth. In this article, I argue that the individualist-collectivist dimension can also affect development through its impact on the quality of government. The in-group favoritism inherent to collectivist societies is likely to engender corruption, nepotism and clientelism in the public sphere. In individualist societies, the relative weakness of in-group pressures and an emphasis on personal achievement and worth will contribute towards a more meritocratic and efficient public sector to the benefit of long-run growth. Empirical evidence is provided suggesting that insofar as individualism affects economic development it does so because it promotes good governance.