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Social Networks – markets are more complete – more trade – better allocation of resources – higher industrialisation – improved economic performance Important point here: markets are incomplete due to asymmetric information Better information Fow in non-polarised societies – reduces the extent of information asymmetry – leading to better enforcement mechanisms. Social links: promote the development of credit, insurance and other mar- kets where asymmetric information matters Role of reputation and trust in network formation in manufacturing – Economic Under-performance in Africa Easterly and Levine (1997): Africa’s growth tragedy Countries with more ethnolinguistic fractionalisation – tended to grow more slowly – identi±ed as principle cause of slow development. Reynal-Querol (1999): religious fractionalisation has signi±cant impact on growth rates – having high fractions of the populations in animist cults –
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Unformatted text preview: has an impact on economic growth. Ethnolinguistic fractionalisation: Probability that any two people drawn from the population are from distinct groups. ormally: ELF 1 i b proportion of ethnolinguistic group i in the population B 2 The we need to address is that whether ethnic diversity per se is an im-pediment to development. Alesina, Baqir and Easterly (1999) : They nd that in US, high levels of ethnic diversity are associated with up to 25% lower funding for schools and other public services in US municipalities. Mauro (1995): National ethnic diversity signicantly associated with poor bureaucratic performance and political instability across countries. Prob-lem: cant control for much in these regressions. It is not entirely clear what the specic mechanisms are through which ethnic diversity affects economic performance. Possibly, with diversity, Development Economics, LSE Summer School 2007 208...
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This note was uploaded on 12/29/2011 for the course ECO 307 taught by Professor Dublin during the Spring '10 term at SUNY Stony Brook.

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