IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Economic Impact of Social Ties: Evidence from German Reunification

  • Burchardi, Konrad B.
  • Hassan, Tarek

We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for non-economic reasons can be an important determinant of regional economic growth. We show that West German households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.7 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8470
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8470.

as
in new window

Length:
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:cpr:ceprdp:8470
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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.:

as in new window
  1. Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel Sturm & Nikolaus Wolf, 2012. "The economics of density: evidence from the Berlin wall," LSE Research Online Documents on Economics 58600, London School of Economics and Political Science, LSE Library.
  2. Redding, Stephen J. & Sturm, Daniel M, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," CEPR Discussion Papers 5015, C.E.P.R. Discussion Papers.
  3. Mevlude Akbulut-Yuksel, 2009. "Children of War: The Long-Run Effects of Large-Scale Physical Destruction and Warfare on Children," HiCN Working Papers 62, Households in Conflict Network.
  4. Karlan, Dean & Mobius, Markus & Rosenblat, Tanya & Szeidl, Adam, 2009. "Trust and Social Collateral," Staff General Research Papers 13026, Iowa State University, Department of Economics.
  5. Attila Ambrus & Markus Mobius & Adam Szeidl, 2007. "Consumption Risk-sharing in Social Networks," Economics Working Papers 0079, Institute for Advanced Study, School of Social Science.
  6. Stefan Dercon & Joachim de Weerdt, 2004. "Risk-Sharing Networks And Insurance Against Illness," Development and Comp Systems 0409019, EconWPA.
  7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1095-1131, August.
  8. Yael V. Hochberg & Alexander Ljungqvist & Yang Lu, 2007. "Whom You Know Matters: Venture Capital Networks and Investment Performance," Journal of Finance, American Finance Association, vol. 62(1), pages 251-301, 02.
  9. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November.
  10. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2007. "The Small World of Investing: Board Connections and Mutual Fund Returns," NBER Working Papers 13121, National Bureau of Economic Research, Inc.
  11. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  12. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
  13. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  14. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  15. Besley, T. & Coate, S., 1991. "Group Lending, Repayment Incentives And Social Collateral," Papers 152, Princeton, Woodrow Wilson School - Development Studies.
  16. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
  17. Daron Acemoglu & Tarek A. Hassan & James A. Robinson, 2011. "Social Structure and Development: A Legacy of the Holocaust in Russia," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 895-946.
  18. David Card, 1990. "The impact of the Mariel boatlift on the Miami labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
  19. Marianne Bertrand & Erzo F. P. Luttmer & Sendhil Mullainathan, 2000. "Network Effects And Welfare Cultures," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 1019-1055, August.
  20. Claudia Martínez Alvear & Dean Yang, 2007. "Remittances and Poverty in Migrants’ Home Areas: Evidence from the Philippines," Working Papers wp257, University of Chile, Department of Economics.
  21. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  22. Edward Miguel & Gerard Roland, 2006. "The Long Run Impact of Bombing Vietnam," NBER Working Papers 11954, National Bureau of Economic Research, Inc.
  23. David Atkin, 2013. "Trade, Tastes and Nutrition in India," Working Papers id:5548, eSocialSciences.
  24. Thomas Chaney, 2011. "The Network Structure of International Trade," NBER Working Papers 16753, National Bureau of Economic Research, Inc.
  25. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The strategic bombing of German cities during World War II and its impact on city growth," Journal of Economic Geography, Oxford University Press, vol. 4(2), pages 201-218, April.
  26. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz, 2005. "Experimental Analysis of Neighborhood Effects," NBER Working Papers 11577, National Bureau of Economic Research, Inc.
  27. Camelia M. Kuhnen, 2009. "Business Networks, Corporate Governance, and Contracting in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 64(5), pages 2185-2220, October.
  28. Rachel M. Friedberg, 2001. "The Impact Of Mass Migration On The Israeli Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1373-1408, November.
  29. Esther Duflo & Emmanuel Saez, 2002. "The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment," NBER Working Papers 8885, National Bureau of Economic Research, Inc.
  30. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  31. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
  32. Lori A. Beaman, 2012. "Social Networks and the Dynamics of Labour Market Outcomes: Evidence from Refugees Resettled in the U.S," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 128-161.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. SOEP based publications

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8470. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.