TY  - JOUR
AU  - Burchardi,Konrad B.
AU  - Hassan,Tarek Alexander
TI  - The Economic Impact of Social Ties: Evidence from German Reunification
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17186
PY  - 2011
Y2  - June 2011
UR  - http://www.nber.org/papers/w17186
L1  - http://www.nber.org/papers/w17186.pdf
N1  - Author contact info:
Konrad Burch. Burchardi
Institute for International Economic Studies 
Stockholm University
SE-106 91 Stockholm
Sweden
E-Mail: konrad.burchardi@iies.su.se

Tarek Alexander Hassan
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/834-3291
Fax: 773/753-0851
E-Mail: tarek.hassan@chicagobooth.edu
AB  - 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.
ER  -