Commercial culture, political culture and economic policy polarization: the case of Japan

In this paper we present a model of endogenous policy formation that captures crucial aspects of the Japanese commercial and political culture. We analyze the influence of certain cultural traits and show that cultural idiosyncrasies are important determinants of policy formation; especially the complex interaction of the two types of cultures is shown to have significant consequences for the polarization of policy stances. Contrasting our model's behavior with the stylized facts of Japanese politics, we arrive at the conclusion that the model's behavior is compatible with the observed policy positions held by Japanese politicians over the last 50 years. (C) 2003 Elsevier B.V. All rights reserved.