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Social Capital, Creative Destruction and Economic Growth

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Author Info
Paul Frijters
Dirk Bezemer
Uwe Dulleck (School of Economics and Finance, Queensland University of Technology)

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Abstract

This paper provides an analytical framework to capture the economic importance of social capital for growth and innovation. Relational Capital (RC) consists of contacts between economic necessary to acquire inputs and to sell outputs units. These contacts form the individual aspect of social capital that is directly productive. Replacement of old contacts by new ones is part of Schumpeterian creative destruction leading to technological progress. Because informal social networks facilitate the search for contacts, many empirical studies find that social networks supports income generation and innovation. Market institutions enjoy increasing returns to scale in aiding contact formation compared to informal social capital networks. For growth rates in developing countries to increase, a 'fundamental transformation' from informal to formal search institutions is therefore required. But since RC replacement carries a negative externality, creative destruction and technological progress may be punished if it threatens political elite interests. Growth experiences in transition and developing countries are interpreted in this framework.

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Paper provided by School of Economics and Finance, Queensland University of Technology in its series Paul Frijters Discussion Papers with number 2004.

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Date of creation: 15 Jun 2004
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Handle: RePEc:qut:pfrijt:2004

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Related research
Keywords: Social Capital Endogenous Growth Relational Capital Development Economic Systems

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Xiaowen Tian, 1999. "Market Orientation and Regional Economic Disparities in China," Post-Communist Economies, Taylor and Francis Journals, vol. 11(2), pages 161-172, June. [Downloadable!] (restricted)
  2. Roland, G. & Verdier, T., 1997. "Transition and the Output Fall," DELTA Working Papers 97-09, DELTA (Ecole normale supérieure).
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  3. Steven N. Durlauf, 2002. "On the Empirics of Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 459-479, November. [Downloadable!] (restricted)
  4. Dirk Bezemer & Uwe Dulleck & Paul Frijters, 2003. "Contacts, Social Capital and Market Institutions - A Theory of Development," Vienna Economics Papers 0311, University of Vienna, Department of Economics. [Downloadable!]
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  5. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
  6. Samuel Bowles & Herbert Gintis, 2002. "Social Capital and Community Governance," Economic Journal, Royal Economic Society, vol. 112(483), pages 419-436, November. [Downloadable!] (restricted)
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  7. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November. [Downloadable!] (restricted)
  8. Temple, Jonathan, 1998. "Initial Conditions, Social Capital and Growth in Africa," Journal of African Economies, Oxford University Press, vol. 7(3), pages 309-47, October.
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  1. Thomas Farole & Andrés Rodríguez-Pose & Michael Storper, 2007. "Social capital, rules, and institutions: a cross-country investigation," Working Papers 2007-12, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
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