Accounting Institutions Emerge Very Early in an Economy’s Development
Abstract: The “paper trail” of receipts and vouchers that is subsequently recorded in the journal entry provides the foundation for modern accounting. In this paper, we trace the impact of the recordkeeping function of accounting on small societies. Our tests, which use the ethnographic data in the Standard Cross-Cultural Sample (SCCS), indicate that recordkeeping is a foundational institution that originates very early in an economy’s development. Recordkeeping promotes the emergence of economic institutions such as markets, hierarchies and specialized division of labor. These economic institutions in turn foster favorable societal outcomes such as agricultural success, political stability, and investment in tangible and human capital.