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Social ties and economic development

  • Anjos, Fernando
  • Anchorena, Jose

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35322.

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Date of creation: 08 May 2008
Date of revision: 09 Dec 2011
Handle: RePEc:pra:mprapa:35322
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