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Social capital and investment in R&D: new externalities

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  • Tiago Neves Sequeira
  • Alexandra Ferreira-Lopes

Abstract

We introduce social capital in an endogenous growth model with physical capital, human capital, and research and development (R&D), and we compare the market with the efficient solutions. As social capital is not tradable in the market and since it favours research networks, it introduces new externalities in this framework. These externalities induce the market to invest less in social capital than would a social planner and decrease the tendency to underinvestment in R&D. We quantify the distortions in the model. In some conditions, the new distortions are strong enough to overcome the usual result of underinvestment in R&D.

Suggested Citation

  • Tiago Neves Sequeira & Alexandra Ferreira-Lopes, 2013. "Social capital and investment in R&D: new externalities," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(1), pages 77-97, February.
  • Handle: RePEc:taf:jbemgt:v:14:y:2013:i:1:p:77-97
    DOI: 10.3846/16111699.2011.638667
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    References listed on IDEAS

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    1. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    2. Beugelsdijk, S. & Smulders, J.A., 2009. "Bonding and Bridging Social Capital and Economic Growth," Discussion Paper 2009-27, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Kim, Yong Jin & Lee, Chul-In, 2015. "Social values and economic dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 69-84.

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