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Social Capital, Creative Destruction and Economic Growth

  • Paul Frijters
  • Dirk Bezemer
  • Uwe Dulleck

    (School of Economics and Finance, Queensland University of Technology)

This paper provides an analytical framework to capture the economic importance of social capital for growth and innovation. Relational Capital (RC) consists of contacts between economic necessary to acquire inputs and to sell outputs units. These contacts form the individual aspect of social capital that is directly productive. Replacement of old contacts by new ones is part of Schumpeterian creative destruction leading to technological progress. Because informal social networks facilitate the search for contacts, many empirical studies find that social networks supports income generation and innovation. Market institutions enjoy increasing returns to scale in aiding contact formation compared to informal social capital networks. For growth rates in developing countries to increase, a 'fundamental transformation' from informal to formal search institutions is therefore required. But since RC replacement carries a negative externality, creative destruction and technological progress may be punished if it threatens political elite interests. Growth experiences in transition and developing countries are interpreted in this framework.

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File URL: http://www.bus.qut.edu.au/paulfrijters/documents/social%20capital_chatty%20paper1.doc
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series Paul Frijters Discussion Papers with number 2004.

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Date of creation: 15 Jun 2004
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Handle: RePEc:qut:pfrijt:2004
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Web page: http://www.bus.qut.edu.au/faculty/economics/
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  1. Dirk Bezemer & Uwe Dulleck & Paul Frijters, 2003. "Contacts, Social Capital and Market Institutions - A Theory of Development," Vienna Economics Papers 0311, University of Vienna, Department of Economics.
  2. Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
  3. Steven N. Durlauf, 2002. "On the Empirics of Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 459-479, November.
  4. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November.
  5. Samuel Bowles & Herbert Gintis, 2002. "Social Capital and Community Governance," Economic Journal, Royal Economic Society, vol. 112(483), pages 419-436, November.
  6. Paul Mosley & Marina Della Giusta, 1999. "A model of social capital and access to productive resources," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(7), pages 921-934.
  7. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  8. Xiaowen Tian, 1999. "Market Orientation and Regional Economic Disparities in China," Post-Communist Economies, Taylor & Francis Journals, vol. 11(2), pages 161-172.
  9. Temple, Jonathan, 1998. "Initial Conditions, Social Capital and Growth in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 7(3), pages 309-47, October.
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