Arbeitspapier
From Tradition to Modernity: Economic Growth in a Small World
This paper introduces the Small World model (Watts and Strogatz, Nature, 1998) into the theory of economic growth and investigates how increasing economic integration affects firm size and effciency, norm enforcement, and aggregate economic performance. When economic integration is low and local connectivity is high, informal norms control entrepreneurial behavior and more integration mainly improves search for effcient investment opportunities. At a higher level of economic integration neighborhood enforcement deteriorates and formal institutions are needed to keep entrepreneurs in check. A gradual take-off to perpetual growth is explained by a feedback effect from investment to the formation of long-distance links and the diffusion of knowledge. If formal institutions are weak, however, the economy does not take off but stagnates at an intermediate income level. Structurally, the equilibrium of stagnation differs from balanced growth by the presence of relatively many small firms of low productivity.
- Language
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Englisch
- Bibliographic citation
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Series: Diskussionsbeitrag ; No. 478
- Classification
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Wirtschaft
Economic Development: General
Economic Growth and Aggregate Productivity: General
Market Structure, Firm Strategy, and Market Performance: General
Transactional Relationships; Contracts and Reputation; Networks
Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
- Subject
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modernization
economic integration
firm size
norms
networks
knowledge spillovers
growth
- Event
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Geistige Schöpfung
- (who)
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Lindner, Ines
Strulik, Holger
- Event
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Veröffentlichung
- (who)
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Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
- (where)
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Hannover
- (when)
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2011
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Lindner, Ines
- Strulik, Holger
- Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
Time of origin
- 2011