Germs, Social Networks and Growth

58 Pages Posted: 19 Nov 2018

See all articles by Alessandra Fogli

Alessandra Fogli

Federal Reserve Bank of Minneapolis

Laura Veldkamp

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Date Written: November 2018

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.

Keywords: Development, disease, economic networks, growth, pathogens, Social Networks, technology diffusion

JEL Classification: E02, I1, O1, O33

Suggested Citation

Fogli, Alessandra and Veldkamp, Laura, Germs, Social Networks and Growth (November 2018). CEPR Discussion Paper No. DP13312, Available at SSRN: https://ssrn.com/abstract=3287059

Alessandra Fogli (Contact Author)

Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

Laura Veldkamp

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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