Social Interactions and Modern Economic Growth

65 Pages Posted: 25 Sep 2018

See all articles by Javier Mejia

Javier Mejia

New York University--Abu Dhabi; Universidad de los Andes, Colombia - Department of Economics

Date Written: June 14, 2018

Abstract

This paper offers a theoretical framework to understand the coevolution of social interactions and long-term economic growth. It begins by considering that most traditional societies did not have educational markets. Thus, access to the required knowledge for transiting to a modern economy had to be transmitted through social interactions, in particular, through the interaction between heterogeneous groups of people–i.e. distant interactions. Once immersed in a modern economy, the productive system should have increased the demand for knowledge, promoting more distant interactions. Simultaneously, the emergence of distant interactions should have affected the connectivity of society, reducing its heterogeneity, making cheaper posterior interactions but reducing their profitability. Moreover, social interactions competed and benefited from other nonmarket activities, child rearing specifically. The model arrives at four basic predictions. First, modern economic growth brings a more cohesive society. Second, modern economic growth brings long-term reductions in fertility with potential short-term increases. Third, initial barriers to social interactions could explain the timing of modern economic growth arrival. Fourth, the timing of modern economic growth arrival could explain current output levels. I exploit different data sources to offer evidence in support of these predictions.

Keywords: Modern economic growth, social interactions, knowledge transmission, diversity, industrialization, structural change

JEL Classification: D85, J13, O11, O14, O33, O41

Suggested Citation

Mejía Cubillos, Javier, Social Interactions and Modern Economic Growth (June 14, 2018). Documento CEDE No. 2018-31, Available at SSRN: https://ssrn.com/abstract=3252204 or http://dx.doi.org/10.2139/ssrn.3252204

Javier Mejía Cubillos (Contact Author)

New York University--Abu Dhabi ( email )

United Arab Emirates

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia
(57 1) 3394949 ext. 5058 (Phone)

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