Barriers to Financial Institutional Development: A Preliminary Theoretical Exploration of Social Capital, Growth and Institutional Development

Ammar Shamaileh

Economics Bulletin, 2018, vol. 38, issue 1, 186-195

Abstract: This note sets forth a preliminary theoretical analysis of the role that social capital plays in the decision faced by states to develop their financial institutions. While financial institutional development has been considered to play a role in both translating portfolio and foreign direct investment into growth, many states choose not to develop their financial institutions. This article analyzes this problem through a simple signaling model related to the underlying levels of social capital within a state, and finds that social capital's effect on the decision to develop financial institutions is tied to the ability of social capital to translate investment into growth.

Keywords: Social Capital; Economic Growth; Institutional Development; FDI (search for similar items in EconPapers)
JEL-codes: C7 H8 (search for similar items in EconPapers)
Date: 2018-02-09
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