Does industrialization build or destroy social networks?

Social networks affect a wide array of economic outcomes, ranging from informal credit and insurance to contracting and the provision of local public goods. Yet the process of creating and maintaining social networks remains poorly understood. This article explores one facet of this issue, the relationship between industrialization and changes in social networks. We examine changes in social networks across Indonesian districts during 1985-97, a period of rapid industrial development in which real per capita income grew by an impressive 70% (World Bank 2002). In the absence of regionally disaggregated income data, we use manufacturing growth as a proxy for income growth throughout this article. © 2006 by The University of Chicago. All rights reserved.