NEW YORK – The United States has built an economic advantage on the strength of being able to diffuse information and technology rapidly. But the societal factors that drive growth and economic expansion are also the same ones that lead to the rapid spread of disease – a key factor as COVID-19 once again begins to spread widely. Research from Laura Veldkamp, the Leon G. Cooperman Professor of Finance & Economics at Columbia Business School, finds that technology adoption within a social network, can be a significant indicator of disease spread as seen with COVID-19.
Professor Veldkamp and her co-author Alessandra Fogli of the Federal Reserve Bank of Minneapolis, develop a multi-part study to compare how a society’s social network can aid economic growth and facilitate disease spread, focusing on 71 countries. Human contact is at the heart of both technology adoption and disease spread, and the researchers analyze how network size, mobility, and other societal factors can create small or vibrant networks – using both theoretical models and decades of U.S. Census data. Networks that are stable, local, and have fewer connections reduce the risk of infection, allowing the participants to live longer. But such low-diffusion networks also restrict the group’s exposure to new technologies. The researchers find that countries whose patterns of social relationships make them most susceptible to communicable diseases are more economically productive. However, if the disease remains prevalent, the network will start to adapt and inhibit the spread of disease. The danger is that this more insular social network will also inhibit technology adoption, and with it, long-run economic growth.
Although the study was produced before the current COVID pandemic, its results have important implications in explaining how countries’ different social structures can determine how they transmit the virus all while having long term benefits for economic growth.
The study, Germs, Social Networks and Growth, is available online here.
About the researcher
Laura Veldkamp is a Professor of Finance at Columbia University's Graduate School of Business and a co-editor of the Journal of Economic Theory...Read more.