Productivity, factor accumulation and social networks: theory and evidence

Abstract

The paper analyzes how social barriers to communication affect economy-wide productivity and factor accumulation. Using a dynamic model of an economy that includes a reproducible capital stock (physical or human) and effective labor, a negative relationship is shown to exist between social barriers to communication and total factor productivity (TFP), per capita consumption and reproducible capital. Robust estimates obtained from cross-country data are consistent with the models predictions. The theory and empirical results help explain cross-country differences in TFP, the high productivity performance of leading industrialized countries and how productivity catch up may be initiated. Show more