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