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Social ties and economic development

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  • Anjos, Fernando
  • Anchorena, Jose

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, a relationship we observe in cross-country data. The model captures additional dimensions of data, namely: (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.

Suggested Citation

  • Anjos, Fernando & Anchorena, Jose, 2008. "Social ties and economic development," MPRA Paper 35322, University Library of Munich, Germany, revised 09 Dec 2011.
    • Handle: RePEc:pra:mprapa:35322
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    Cited by:

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    2. Frijters, Paul & Antić, Nemanja, 2016. "Can collapsing business networks explain economic downturns?," Economic Modelling, Elsevier, vol. 54(C), pages 289-308.

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    More about this item

    Keywords

    social capital; development; transaction costs; networks;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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