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Contacts, Market Institutions, and Development

Author

Listed:
  • Paul Frijters
  • Dirk J Bezemer

    (University of Groningen)

  • Uwe Dulleck

Abstract

We propose an endogenous growth model that incorporates the importance of business contacts and informal contacts. In our model, sold output increases with the stock of business contacts. The modelling of contact creation is based on matching theory. The cost of creating contacts decreases with more Community level Social Capital and Market Institutions, which we understand as networks of informal contacts. Technological growth is driven by the replacement of contacts within the economy. Political interference and centralization can provide disincentives to break old contacts and hence affect innovation. Simulations suggests that our model is in line with empirical observations.

Suggested Citation

  • Paul Frijters & Dirk J Bezemer & Uwe Dulleck, 2005. "Contacts, Market Institutions, and Development," School of Economics and Finance Discussion Papers and Working Papers Series 205a, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:205a
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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2005/WP205a.pdf
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    References listed on IDEAS

    as
    1. Vega-Redondo, Fernando, 2006. "Building up social capital in a changing world," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 2305-2338, November.
    2. Greenaway, David & Morgan, Wyn & Wright, Peter, 2002. "Trade liberalisation and growth in developing countries," Journal of Development Economics, Elsevier, vol. 67(1), pages 229-244, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Endogenous Growth; Relational Capital; Development;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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