Harvard Kennedy School Harvard University

Search this site

logo
Faculty Research Working Paper Series
Ricardo Hausmann
Professor of the Practice of Economic Development
phone: (617)496-3740
fax: (617)496-8753
Institutions vs. Social Interactions in Driving Economic Convergence: Evidence from Colombia
Coscia, Michele, Timothy Cheston, and Ricardo Hausmann. "Institutions vs. Social Interactions in Driving Economic Convergence: Evidence from Colombia." HKS Faculty Research Working Paper Series RWP17-014, February 2017.
Abstract
Are regions poor because they have bad institutions or are they poor because they are disconnected from the social channels through which technology diffuses? This paper tests institutional and technological theories of economic convergence by looking at income convergence across Colombian municipalities. We use formal employment and wage data to estimate growth of income per capita at the municipal level. In Colombia, municipalities are organized into 32 departamentos or states. We use cellphone metadata to cluster municipalities into 32 communication clusters, defined as a set of municipalities that are densely connected through phone calls. We show that these two forms of grouping municipalities are very different. We study the effect on municipal income growth of the characteristics of both the state and the communication cluster to which the municipality belongs. We find that belonging to a richer communication cluster accelerates convergence, while belonging to a richer state does not. This result is robust to controlling for state fixed effects when studying the impact of communication clusters and vice versa. The results point to the importance of social interactions rather than formal institutions in the growth process.
Attachment
pdf

 

 


Copyright © 2017 The President and Fellows of Harvard College