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We develop a parsimonious general equilibrium model where agents allocate time across three activities: production, trade, and leisure. Leisure includes time spent socializing, which economizes transaction costs. Our framework yields multiple equilibria in terms of the number of social ties and predicts that the number of social ties is positively associated with development, a relationship we observe in cross-country data. The model captures additional dimensions of data, namely: i increasing income inequality, but converging growth rates; ii an association between weak social ties and development; and iii an association between number of social ties and size of the transaction sector.

Item Type: MPRA Paper -

Original Title: Social ties and economic development-

Language: English-

Keywords: social capital; development; transaction costs; networks-

Subjects: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property RightsO - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic DevelopmentD - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory-

Author: Anjos, Fernando


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