Social Interactions and Modern Economic Growth

Javier Mejia

No 16379, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: This paper offers a theoretical framework to understand the coevolution of social interactions and long-term economic growth. It begins by considering that most traditional societies did not have educational markets. Thus, access to the required knowledge for transiting to a modern economy had to be transmitted through social interactions, in particular, through the interaction between heterogeneous groups of people–i.e. distant interactions. Once immersed in a modern economy, the productive system should have increased the demand for knowledge, promoting more distant interactions. Simultaneously, the emergence of distant interactions should have affected the connectivity of society, reducing its heterogeneity, making cheaper posterior interactions but reducing their profitability. Moreover, social interactions competed and benefited from other nonmarket activities, child rearing specifically. The model arrives at four basic predictions. First, modern economic growth brings a more cohesive society. Second, modern economic growth brings long-term reductions in fertility with potential short-term increases. Third, initial barriers to social interactions could explain the timing of modern economic growth arrival. Fourth, the timing of modern economic growth arrival could explain current output levels. I exploit different data sources to offer evidence in support of these predictions.

Keywords: Modern economic growth; social interactions; knowledge transmission; diversity; industrialization; structural change. (search for similar items in EconPapers)
JEL-codes: D85 J13 O11 O14 O33 O41 (search for similar items in EconPapers)
Pages: 65
Date: 2018-06-18
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https://repositorio.uniandes.edu.co/bitstream/handle/1992/41030/dcede2018-31.pdf

Related works:
Working Paper: Social Interactions and Modern Economic Growth (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:016379

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