Social networks as a catalyst of economic change

- The letter studies the impact of social networks on economic outcomes.
- I study the adoption of a new financial product by East Germans after reunification.
- A split-population duration model distinguishes transitory from long-run effects.
- I find that social networks mattered for the timing, but not for long-term choices.
- Both initial local ties and ties to family in the West accelerated savings decisions.

This letter finds that East Germans with strong social ties invested earlier in a popular new financial product after reunification, while long-term ownership remained unaffected. Hence, studies of the economic impact of social networks should distinguish transitory from long-run effects.