The Economic Impact of Social Ties: Evidence from German Reunification / Konrad B. Burchardi, Tarek Alexander Hassan.

Format:

Book

Author/Creator:

Burchardi, Konrad B. (Konrad Burchard), 1980-

Contributor:

National Bureau of Economic Research.

Hassan, Tarek Alexander.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17186.

NBER working paper series no. w17186

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Economic Impact of Social Ties

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for non-economic reasons can be an important determinant of regional economic growth. We show that West German households who have social ties to East Germany in 1989 experience a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions which (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.6 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development.

Notes:

Print version record

June 2011.