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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. Claudio Ferraz & Frederico Finan, 2008. "Exposing Corrupt Politicians: The Effects of Brazil's Publicly Released Audits on Electoral Outcomes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 703-745, 05.
  2. Edward L. Glaeser & Giacomo A. M. Ponzetto & Jesse M. Shapiro, 2004. "Strategic Extremism: Why Republicans and Democrats Divide on Religious Values," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2044, Harvard - Institute of Economic Research.
  3. Nannicini, Tommaso & Stella, Andrea & Tabellini, Guido & Troiano, Ugo, 2010. "Social Capital and Political Accountability," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7782, C.E.P.R. Discussion Papers.
  4. Alessandra Bonfiglioli & Gino Gancia, 2010. "The Political Cost of Reforms," Working Papers 503, Barcelona Graduate School of Economics.
  5. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  6. 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.
  7. 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.
  8. Giacomo A. M. Ponzetto, 2011. "Heterogeneous Information and Trade Policy," 2011 Meeting Papers, Society for Economic Dynamics 189, Society for Economic Dynamics.
  9. Besley, Timothy J. & Burgess, Robin, 2001. "The Political Economy of Government Responsiveness: Theory and Evidence from India," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2721, C.E.P.R. Discussion Papers.
  10. 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.
  11. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, 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," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1360, Department of Economics and Business, Universitat Pompeu Fabra.

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