The dissertation analyzes a broad range of research questions about the relationship between non-economic factors and economic outcomes under the framework of comparative economic systems. Chapter 1 explores the effect of cultural diversity on local public spending under four different political institutions–direct and representative democracy, soft and repressive authoritarianism. The analysis is done by modelling on the various preferences of cultural groups, the antagonism among cultural groups and motivations of politicians. In the analysis, we divide cultural diversity into three intervals: 1, The low level when a majority group exists; 2, The intermediate level without a majority group, but two large groups; 3, The high level with at least three large groups. The results show that the relationship between public spending and cultural diversity is related to political systems and the interval of cultural diversity. The monotone decreasing relationship is found only under soft authoritarianism. Under direct democracy or representative democracy with rent-seeking politicians, public spending decreases with cultural diversity when cultural diversity is low or high, but the relationship is inverted U-shaped at intermediate cultural diversity. When politicians are accountable under representative democracy, the relationship is also related to the population composition across electoral districts. If all districts have the same composition of cultural groups, public spending decreases monotonically at low and intermediate diversity, but rise and fall in public spending alternate at high diversity. If different groups concentrate in different districts, the alternation of rise and fall appears from the intermediate diversity. Under repressive authoritarianism, decrease and increase in public spending alternate from the low diversity, but the increase is not continuous when diversity not high.Chapter 2 explores the effects of dialectal diversity on economic performance by drawing evidence from Chinese prefecture-level cities. Considering dialectal distances, we compute five indices of Chinese dialectal diversity: 1. Dialectal fractionalization; 2. Adjusted dialectal fractionalization; 3. Dialectal polarization; 4. Adjusted dialectal polarization and 5. Periphery heterogeneity. Our primary dataset is a panel of 5-year average data over the period from 2001 to 2015 including 274 cities. The basic approach used is the fixed effect regression. To solve the endogeneity problem, dialectal diversity is instrumented by historical migration, the average attitude, and the share of land with an altitude below 500 meters. We find that dialectal fractionalization, dialectal polarization, and periphery heterogeneity have a positive effect on both the level of income per capita and economic growth. Adjusted dialectal fractionalization exhibits a positive effect only on the change in economic growth over time. However, adjusted dialectal polarization does not show any robust effects. Furthermore, the experience of being governed by the Chinese Communist Party during the revolutionary war promotes the positive effect of dialectal diversity in eastern China, while it has a negative impact in central and north-eastern regions of the country. Chapter 3 investigates the impact of antiquity on capitalism through the finance-growth nexus. We define antiquity as the length of established statehood (i.e., state history) and agricultural years. We argue that extractive institutions and deeply entrenched interest groups may prevail in societies with ancient roots. The paper offers an in-depth analysis of one particular channel through which extractive institutions may impair economic growth: the finance-growth channel. We propose that in countries with ancient statehood, the financial sector might be captured by powerful economic and political elites leading to a distorted finance-growth relationship. We build a model in which the equilibrium relationship between companies and banks depends on the entrenchment of the economic elites and the length of established statehood. To validate our argument empirically, we run panel-threshold regressions on a global sample between 1970 and 2014. The regression results are supportive and show that financial development – measured by the outstanding amount of credit – is negative for growth in states with ancient institutional origins, while it is positive in relatively younger ones. Chapter 4 examines the relationship between the population share of the Chinese diaspora and economic growth in Southeast Asia through empirical analysis. We run pooled OLS and 2SLS regressions using a dataset over the period from 1959 to 2014. In IV regressions, the population share of the Chinese diaspora is instrumented by historical variables, the number of product categories per unit area in the 1930s and the dummy of the massacre by colonists. Regressions are done for the whole sample, subsamples differing in the economic environment of doing business and the sample without Singapore respectively. We also use an alternative instrumental variable, the dummy of the port along the sea route of Zheng He’s voyage, in the robustness check. Results show that, since the independence of countries in Southeast Asia, the relationship between the population share of the Chinese diaspora and economic growth is positive, and the relationship is stronger in developing countries. However, when the economic environment of doing business is discriminatory against ethnic Chinese, countries with a higher share of the Chinese diaspora are inclined to have lower economic growth. This is the consequence of the efficiency loss because of the deprivation and weakening of the Chinese diaspora economy.
