Village versus Market Social Capital: An Approach to Development, mimeo (2005)
| Citations: | 6 - 1 self |
BibTeX
@MISC{Kumar05villageversus,
author = {Krishna B. Kumar and John G. Matsusaka and Cristina De Nardi and Yasushi Hamao and Anthony Marino and Christopher Phelan and Romain Ranciere and Fanghui Song and Kei-mu Yi},
title = {Village versus Market Social Capital: An Approach to Development, mimeo},
year = {2005}
}
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Abstract
This paper develops a theory in which there are two types of social capital to enforce contracts: “village ” capital relies on personal networks and repeat play; “market ” capital relies on third parties such as auditors and courts. Village capital is efficient when most trading is local, but only market capital can support trading between strangers that allows extensive division of labor and industrialization. We show that economies with low cost of accumulating village capital (say, because people live close together) are richer than economies with high costs when long distance trade is difficult, but are slower to transition to impersonal market exchange (industrialize) when long distance trade becomes feasible. The model provides one way to understand why the wealthiest economies in
