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Geography and Social Networks in Nascent Distal Exchange

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  • Erik O. Kimbrough
  • Bart J. Wilson

Abstract

We design an experiment to explore how geography shapes exchange between spatially distant markets and hypothesize that geographical isolation of traveling intermediaries from stationary sources of production creates social isolation that hinders trade. We characterize our economies with a system of equations derived from Adam Smith: exchange drives specialization, which in turn fuels more exchange, the coupling of which increases welfare. Measures of sociality and the extent of social network exploitation significantly contribute to improved efficiency. We further find that those economies which are the wealthiest are also the most equitable.

Suggested Citation

  • Erik O. Kimbrough & Bart J. Wilson, 2011. "Geography and Social Networks in Nascent Distal Exchange," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(3), pages 409-433, September.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201109)167:3_409:gasnin_2.0.tx_2-f
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    References listed on IDEAS

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    1. Erik O. Kimbrough & Vernon L. Smith & Bart J. Wilson, 2008. "Historical Property Rights, Sociality, and the Emergence of Impersonal Exchange in Long-Distance Trade," American Economic Review, American Economic Association, vol. 98(3), pages 1009-1039, June.
    2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1231-1294.
    3. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    4. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-1418, December.
    5. Henningsen, Arne & Hamann, Jeff D., 2007. "systemfit: A Package for Estimating Systems of Simultaneous Equations in R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 23(i04).
    6. Nee, Victor, 1998. "Norms and Networks in Economic and Organizational Performance," American Economic Review, American Economic Association, vol. 88(2), pages 85-89, May.
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    Cited by:

    1. Kimbrough, Erik O. & Wilson, Bart J., 2013. "Insiders, outsiders, and the adaptability of informal rules to ecological shocks," Ecological Economics, Elsevier, vol. 90(C), pages 29-40.

    More about this item

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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