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Social Capital, Inequality, and Economic Growth

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  • Stefan Dietrich Josten

Abstract

This paper analyzes a heterogeneous-agents OLG model incorporating both endogenous growth and social capital. An individual can either become an active part of the society's networks of trust and mutual cooperation, thus making a positive contribution to overall social capital, or stay socially disintegrated and free-ride on the community's social capital. In the modelled economy, aggregate output and economy-wide human capital and consumption all grow at the average rate of individual human-capital accumulation. An increase in inequality depresses the community's social capital, which in turn lowers the economy's growth rate.

Suggested Citation

  • Stefan Dietrich Josten, 2004. "Social Capital, Inequality, and Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 663-663, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200412)160:4_663:sciaeg_2.0.tx_2-u
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    References listed on IDEAS

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    1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    2. repec:aph:ajpbhl:1997:87:9:1491-1498_6 is not listed on IDEAS
    3. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    5. Gradstein, Mark & Justman, Moshe, 2000. "Human capital, social capital, and public schooling," European Economic Review, Elsevier, vol. 44(4-6), pages 879-890, May.
    6. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    7. repec:dau:papers:123456789/10091 is not listed on IDEAS
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    Cited by:

    1. repec:ris:ecoint:0805 is not listed on IDEAS
    2. Michal Brzezinski, 2013. "Income Polarization and Economic Growth," LIS Working papers 587, LIS Cross-National Data Center in Luxembourg.
    3. Devesh Roy & Abdul Munasib & Xing Chen, 2014. "Social trust and international trade: the interplay between social trust and formal finance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 693-714, November.
    4. Jorge Alberto Charles Coll, 2014. "Inequality and growth in the context of the Mexican economy: Does inequality matter for growth?," Working Papers 331, ECINEQ, Society for the Study of Economic Inequality.
    5. Charles-Coll, Jorge A., 2010. "The optimal rate of inequality: A framework for the relationship between income inequality and economic growth," MPRA Paper 28921, University Library of Munich, Germany.
    6. Mikucka, Malgorzata & Sarracino, Francesco & Dubrow, Joshua K., 2017. "When Does Economic Growth Improve Life Satisfaction? Multilevel Analysis of the Roles of Social Trust and Income Inequality in 46 Countries, 1981–2012," World Development, Elsevier, vol. 93(C), pages 447-459.
    7. Mikucka, Malgorzata & Sarracino, Francesco, 2014. "Making economic growth and well-being compatible: the role of trust and income inequality," MPRA Paper 59695, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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