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The Hype of Social Capital in the Finance - Growth Nexus

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  • Ibrahim D. Raheem

    (The EXCAS, Liege, Beligium)

  • Kazeem B. Ajide

    (University of Lagos, Nigeria)

  • Xuan V. Vo

    (University of Economics Ho Chi Minh City, Vietnam)

Abstract

The trilogy among economic growth, social capital (SC), and financial development is examined based on three hypotheses: first, SC is important in the finance-growth nexus. Second, there is a threshold effect of SC in the finance-growth nexus. Third, the SC-finance-growth trilogy depends on the countries' income level. Building dataset for 70 countries,someinteresting results were obtained: (i) the marginal effects of both SC and finance promotes economic growth at higher levels; (ii)there is evidence of a threshold effect of SC, as finance enhances more growth when SC is below the threshold level; (iii) higher-income countries tend not to benefit from the SC-finance-growth trilogy. These results suggest that the influence of SC on growth trajectory is exaggerated in the literature. The study recommends that policymakers should pursue other sources of economic growth aside SC, while ensuring that the level of SC does not deteriorate.

Suggested Citation

  • Ibrahim D. Raheem & Kazeem B. Ajide & Xuan V. Vo, 2021. "The Hype of Social Capital in the Finance - Growth Nexus," Working Papers of the African Governance and Development Institute. 21/050, African Governance and Development Institute..
    • Handle: RePEc:agd:wpaper:21/050
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    More about this item

    Keywords

    Economic growth; Financial development; Social capital; and Threshold effect;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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