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When sociable workers pay off: Can firms internalize social capital externalities?

  • Ferreira-Lopes, Alexandra
  • Roseta-Palma, Catarina
  • Sequeira, Tiago Neves

We use an endogenous growth model to contrast the socially optimal allocation of human capital with the decentralized solution, in a context where workers make the choices that determine social capital accumulation. As social capital is expected to increase productivity but is not traded in markets, a positive social capital externality is identified. We discuss the possibility that, in response to this externality, firms subsidize social capital accumulation activities, incurring into additional costs that are recouped through productivity gains. This reaction by firms may be seen as a justification for some corporate social responsibility actions targeted at workers, although a full internalization of the externality does not look achievable in practice.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 23 (2012)
Issue (Month): 2 ()
Pages: 127-136

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Handle: RePEc:eee:streco:v:23:y:2012:i:2:p:127-136
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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  1. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
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