Contacts, Market Institutions, and Development

Paul Frijters (), Dirk J Bezemer and Uwe Dulleck ()
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Dirk J Bezemer: University of Groningen

No 205a, School of Economics and Finance Discussion Papers and Working Papers Series from School of Economics and Finance, Queensland University of Technology

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.

Keywords: Endogenous Growth; Relational Capital; Development (search for similar items in EconPapers)
JEL-codes: O11 O41 P51 (search for similar items in EconPapers)
Date: 2005-03-26
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Persistent link: http://EconPapers.repec.org/RePEc:qut:dpaper:205a

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