Social Ties and Economic Development

53 Pages Posted: 22 Apr 2008 Last revised: 15 May 2015

See all articles by Jose F. Anchorena

Jose F. Anchorena

Universidad Católica Argentina

Fernando Anjos

NOVA School of Business and Economics

Date Written: April 27, 2015

Abstract

We develop a parsimonious general equilibrium model where agents allocate time across three activities: production, trade, and leisure. Leisure includes time spent socializing, which economizes transaction costs. Our framework yields multiple equilibria in terms of the number of social ties and predicts that the number of social ties is positively associated with development. We calibrate our model using an empirical measure of country-level social ties and are able to quantitatively match the cross-country relationship between social ties and income per capita. Our calibration also captures additional dimensions of cross-country data: (i) increasing income inequality, but converging growth rates; (ii) an association between weak social ties and development; and (iii) an association between number of social ties and size of the transaction sector.

Keywords: social capital, development, networks, transaction costs

JEL Classification: E1, E2, O1, O4

Suggested Citation

Anchorena, Jose F. and Anjos, Fernando, Social Ties and Economic Development (April 27, 2015). Journal of Macroeconomics, Vol. 45, 2015, Available at SSRN: https://ssrn.com/abstract=1123767 or http://dx.doi.org/10.2139/ssrn.1123767

Jose F. Anchorena

Universidad Católica Argentina ( email )

Buenos Aires
Argentina

Fernando Anjos (Contact Author)

NOVA School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

HOME PAGE: http://sites.google.com/site/fernandoanjossite/

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