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Germs, Social Networks and Growth

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  • Fogli, Alessandra
  • Veldkamp, Laura

Abstract

Does the pattern of social connections between individuals matter for macroeconomic outcomes? If so, where do these differences come from and how large are their effects? Using network analysis tools, we explore how different social network structures affect technology diffusion and thereby a country's rate of growth. The correlation between high-diffusion networks and income is strongly positive. But when we use a model to isolate the effect of a change in social networks, the effect can be positive, negative, or zero. The reason is that networks diffuse ideas and disease. Low-diffusion networks have evolved in countries where disease is prevalent because limited connectivity protects residents from epidemics. But a low-diffusion network in a low-disease environment needlessly compromises the diffusion of good ideas. In general, social networks have evolved to fit their economic and epidemiological environment. Trying to change networks in one country to mimic those in a higher-income country may well be counterproductive.

Suggested Citation

  • Fogli, Alessandra & Veldkamp, Laura, 2018. "Germs, Social Networks and Growth," CEPR Discussion Papers 13312, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13312
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    References listed on IDEAS

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    Cited by:

    1. Maria Rosaria Carillo & Vincenzo Lombardo & Alberto Zazzaro, 2019. "The rise and fall of family firms in the process of development," Journal of Economic Growth, Springer, vol. 24(1), pages 43-78, March.

    More about this item

    Keywords

    Development; disease; economic networks; growth; pathogens; Social Networks; technology diffusion;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • I1 - Health, Education, and Welfare - - Health
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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