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Economic growth and social capital: happily together ever after?

Francesco Sarracino

No 2011-52, LISER Working Paper Series from LISER

Abstract: Does economic growth go with an increase of social capital over time? A long lasting debate in the economic discipline agrees that higher stocks of social capital enhance economic growth, but overlooked the temporal dimension. Indeed there are reasons to suspect that the positive correlation identified in the literature can not be extended to the relationship over time. Using three proxies of social capital (group membership, trust in others and an index of civicness) and data from the six waves integratedWorld Values Survey / European Value Study data-base I provide evidence confirming that at any point in time, richer countries are also richer in social capital. However, if we compare the time trends of social capital with economic growth, a negative and significant relationship arises. In other words, social capital and GDP go together across countries, but turn to be negatively correlated over time. This paradoxical evidence is compatible with an explanation in terms of increasing economic inequality: in countries experiencing strong increases in inequality, trends of social capital are negatively correlated with economic growth. For countries where economic growth is accompanied by negative or modest increases in inequality, this relationship disappears.

Keywords: economic growth; social capital; time-series; WVS; EVS (search for similar items in EconPapers)
JEL-codes: D03 D60 I31 O10 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2011-11
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