SEARCH

SEARCH BY CITATION

Keywords:

  • democratic institutions;
  • individualism;
  • collectivism;
  • investment volatility;
  • growth volatility
  • E32;
  • O43

Recently some studies provided evidence that democratic political institutions generate less volatile growth. These studies, however, do not provide any link between democracy and investment volatility. Here, we focus on the specific channel that links individualistic societies and low growth volatility. We test whether investment volatility and consequently growth volatility are lower in individualistic societies. We construct a two-equation system of investment and income growth volatility, allowing various measures of individualism to influence growth volatility both directly and indirectly. We find that individualism significantly directly and indirectly influences growth volatility negatively.