Working Paper: CEPR ID: DP13011
Authors: Mark Gradstein; Moshe Justman
Abstract: The diversity of social interaction within economic communities affects productivity and growth, and is itself shaped by economic conditions. These reciprocal effects raise the possibility of multiple equilibria, of setting a socially polarized economy stagnating in poverty on a new path of social integration and economic growth through external intervention or an internal political initiative. This paper describes a simple analytical model that captures these reciprocal effects, and sheds light on the role of government capacity, community leadership, federation and external credit or aid, in achieving economic growth through social integration.
Keywords: Cultural Diversity; Economic Growth; Social Interaction
JEL Codes: O11; Z10; Z18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social integration (Z13) | productivity (O49) |
| diversity of social interactions (Z13) | productivity and growth (O49) |
| limited interaction among ethnically distinct groups (J15) | poor economic performance (P47) |
| government capacity and community leadership (H10) | social convergence (F62) |
| strong government (H10) | policies that promote social convergence (F68) |
| policies that promote social convergence (F68) | economic growth (O49) |
| external interventions (credit or aid) (F35) | growth in a socially polarized economy (F62) |