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Social Capital, Government Expenditures and Growth

Giacomo Ponzetto () and Ugo 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. We present a 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, we find it alleviates myopic political incentives to underinvest in human capital, and it helps the selection of politicians that 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. We provide evidence consistent with the predictions of our model. Individuals with higher social capital are more informed about their government. Countries with higher social capital spend a higher share of output on public education.

JEL-codes: D72 D83 H4 H52 I22 I25 O43 Z13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu, nep-gro and nep-soc
Date: 2018-04
Note: DEV ED EFG PE POL
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Related works:
Working Paper: Social capital, government expenditures, and growth (2018) Downloads
Working Paper: Social Capital, Government Expenditures, and Growth (2014) Downloads
Working Paper: Social Capital, Government Expenditures, and Growth (2014) Downloads
Working Paper: Social Capital, Government Expenditures, and Growth (2012) Downloads
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