Social Capital, Government Expenditures, and Growth

Ugo antonio Troiano and Giacomo Ponzetto

No 612, Working Papers from Barcelona School of Economics

Abstract: This paper shows that social capital increases economic growth by raising government investment in human capital through better political incentives and selection. We provide empirical evidence that a greater share of output is spent on public education where social capital is higher, both across countries and across U.S. states. We develop a theoretical model of stochastic endogenous growth with imperfect political agency. Only some people correctly anticipate the future returns to current spending on public education. Greater social diffusion of information makes this knowledge more widespread among voters. As a result, social capital alleviates myopic political incentives to underinvest in human capital. It also helps voters select politicians who ensure high productivity in public education. Through this mechanism, we show that social capital raises the equilibrium growth rate of output and reduces its volatility.

Keywords: imperfect information; economic growth; elections; social capital; education expenditures; government expenditures (search for similar items in EconPapers)
JEL-codes: D72 D83 H52 H75 I22 I25 I26 O43 Z13 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-cta, nep-dge, nep-fdg, nep-pbe and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Social capital, government expenditures, and growth (2024)
Working Paper: Social Capital, Government Expenditures and Growth (2018)
Working Paper: Social Capital, Government Expenditures, and Growth (2014)
Working Paper: Social Capital, Government Expenditures, and Growth (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:612

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