Social Capital, Government Expenditures and Growth

Giacomo Ponzetto and Ugo antonio Troiano

No 24533, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D72 D83 H4 H52 I22 I25 O43 Z13 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-edu, nep-gro and nep-soc
Note: DEV ED EFG PE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Social Capital, Government Expenditures, and Growth (2015)
Working Paper: Social Capital, Government Expenditures, and Growth (2014)
Working Paper: Social Capital, Government Expenditures, and Growth (2012)
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