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Cultural Economics

In the recent years, economists have engaged in studies on the effect of culture, individual preferences and values on an economy. These studies have shown that the economic activity of a country, for instance, the international trade, is highly influenced by the level of trust the citizens have to their fellow citizens and the country’s institutions. Two of the economists, Alberto Bisin and Thierry Verdier devised models that explain the interconnection between an individual’s resources and preferences to inheritance or transmission of the cultural traits. This transmission is regarded as a compromise between the access to information, preferences and the costs involved.

Practical Applications

Economic occurrences, depending on intensity, have an influence on an individual’s culture and beliefs. For instance, economic changes and shocks have the potential to affect a person's preferences, values and culture permanently. However, besides the economy, other geopolitical factors fuel this transformation. This dynamism between culture, economics, and value has a high impact of aggravating globalization, which is multidisciplinary. When two companies are involved in international trade, the cultural distance between them is characterized with steep reduction hence increasing levels of bilateral trade. Besides, the trade is more accelerated when differentiated products are involved. From the several years of research and surveys, the economists observed that the practicality of effect of culture on the economy was better explained and observed based on the answers provided by the young people. Summarily, both the economy and culture have influenced each other interchangeably.