A Theory of Individualism, Collectivism and Economic Outcomes

Abstract

This paper presents a dynamic model to study the impact on the economic outcomes in different societies during the Malthusian Era of individualism (time spent working alone) and collectivism (complementary time spent working with others). The model is driven by opposing forces: a greater degree of collectivism provides a higher safety net for low quality workers but a greater degree of individualism allows high quality workers to leave larger bequests. The model suggests that more individualistic societies display smaller populations, greater per capita income and greater income inequality. Some (limited) historical evidence is consistent with these predictions.