Ep. 32: How policy shapes culture

AEA Research Highlights

Culture is shaped by the conditions in which humans live.

As societies modernize, their cultural traditions will change too. But it’s difficult to identify what is driving those changes and what role public policy may be playing.

In a paper in the American Economic Review, UCLA professor Natalie Bau investigated how the introduction of a formal pension system affected traditional family arrangements in Indonesia and Ghana. She found that having access to a pension led parents to invest less in the education of children who would have traditionally supported them in old age. It also resulted in more of those children leaving home after marriage rather than continuing to live with their parents, as was the customary practice.

These findings have broader implications for how we understand the interplay between culture and policy, particularly in low-income countries.

Bau spoke with Chris Fleisher about the complexity of studying the intersection of culture and economics, the implications from her research for the wider push for pension reform in the developing world, and the unintended consequences from public policy.