Public policies are often more effective in socially cohesive societies resulting in greater poverty
reduction and a more stable growth process. Lack of social cohesion hampers the ability to
implement efficient fiscal policy aimed at reducing inequality. Social cohesion also reduces
transaction costs, that is, the costs incurred in making economic exchanges, such as information
gathering, communications, and contract enforcement. Finally, social cohesion enhances growth by
facilitating collective action, that is cooperation among individuals in pursuit of shared objectives