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Social Capital, Government Expenditures, and Growth

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  • Giacomo Ponzetto
  • Ugo Troiano

Abstract

We present a tractable stochastic endogenous growth model that explains how social capital influences economic development. In our model, social capital increases citizens' awareness of government activity. Hence, it alleviates the electoral incentives to under- invest in education, whose returns are delayed and less visible to voters. In equilibrium, higher social capital raises the average output growth rate and reduces its volatility by increasing public investment in education while making its returns higher and less variable. Our theory also predicts that a more unequal distribution of social capital reduces public education expenditures. We provide suggestive cross-country evidence consistent with these predictions.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 612.

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Date of creation: Jul 2014
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Handle: RePEc:bge:wpaper:612

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Keywords: social capital; education expenditures; economic growth; elections; government expenditures; imperfect information;

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  1. Timothy Besley & Robin Burgess, 2000. "The political economy of government responsiveness: theory and evidence from India," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2308, London School of Economics and Political Science, LSE Library.
  2. Giacomo A. M. Ponzetto, 2008. "Heterogeneous information and trade policy," Economics Working Papers 1296, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2011.
  3. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, Springer, vol. 52(3), pages 273-297, January.
  4. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  5. Bonfiglioli, Alessandra & Gancia, Gino A, 2011. "The Political Cost of Reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8421, C.E.P.R. Discussion Papers.
  6. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U.S. Disaster Relief," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(2), pages 693-728, 05.
  7. Edward L. Glaeser & Giacomo A. M. Ponzetto & Jesse M. Shapiro, 2005. "Strategic Extremism: Why Republicans and Democrats Divide on Religious Values," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(4), pages 1283-1330, November.
  8. Ferraz, Claudio & Finan, Frederico S., 2007. "Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes," IZA Discussion Papers 2836, Institute for the Study of Labor (IZA).
  9. Tommaso Nannicini & Andrea Stella & Guido Tabellini & Ugo Troiano, 2013. "Social Capital and Political Accountability," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 222-50, May.
  10. James M. Snyder & David Strömberg, 2010. "Press Coverage and Political Accountability," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 118(2), pages 355-408, 04.
  11. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
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Cited by:
  1. Alessandra Bonfiglioli & Gino Gancia, 2012. "Uncertainty, Electoral Incentives and Political Myopia," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 915.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

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