Paper #1307

Títol:

Social capital, government expenditures, and growth

Autors:

Giacomo A. M. Ponzetto i Ugo Troiano

Data:

Febrer 2012

Resum:

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 therotical 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.

Paraules clau:

Social Capital, Education Expenditures, Economic Growth, Elections, Government Expenditures, Imperfect Information

Codis JEL:

D72, D83, H52, I22, I25, O43, Z13

Àrea de Recerca:

Macroeconomia i Economia Internacional

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