IDEAS home Printed from https://ideas.repec.org/p/bge/wpaper/612.html
   My bibliography  Save this paper

Social Capital, Government Expenditures, and Growth

Author

Listed:
  • Giacomo A.M. Ponzetto
  • Ugo Troiano

Abstract

This paper shows that social capital increases economic growth by raising government investment in human capital. We present a model of stochastic endogenous growth with imperfect political agency. Only some people correctly anticipate the future returns to current spending on public education. Greater social diffusion of information makes this knowledge more widespread among voters. As a result, we find it alleviates myopic political incentives to underinvest in human capital, and it helps the selection of politicians that ensure high productivity in public education. Through this mechanism, we show that social capital raises the equilibrium growth rate of output and reduces its volatility. We provide evidence consistent with the predictions of our model. Individuals with higher social capital are more informed about their government. Countries with higher social capital spend a higher share of output on public education.

Suggested Citation

  • Giacomo A.M. Ponzetto & Ugo Troiano, 2014. "Social Capital, Government Expenditures, and Growth," Working Papers 612, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:612
    as

    Download full text from publisher

    File URL: https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/612.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Edward L. Glaeser & Giacomo A. M. Ponzetto & Jesse M. Shapiro, 2005. "Strategic Extremism: Why Republicans and Democrats Divide on Religious Values," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1283-1330.
    2. Oded Galor & Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1133-1191.
    3. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
    4. Timothy Besley & Robin Burgess, 2002. "The Political Economy of Government Responsiveness: Theory and Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1415-1451.
    5. Glaeser, Edward L. & Ponzetto, Giacomo A.M., 2014. "Shrouded costs of government: The political economy of state and local public pensions," Journal of Public Economics, Elsevier, vol. 116(C), pages 89-105.
    6. Yehonatan Givati & Ugo Troiano, 2012. "Law, Economics, and Culture: Theory of Mandated Benefits and Evidence from Maternity Leave Policies," Journal of Law and Economics, University of Chicago Press, vol. 55(2), pages 339-364.
    7. Sangnier, Marc, 2013. "Does trust favor macroeconomic stability?," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 653-668.
    8. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    9. Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2012. "Centralization and accountability: theory and evidence from the Clean Air Act," Working Papers 2012/14, Institut d'Economia de Barcelona (IEB).
    10. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624.
    11. Alesina, Alberto & Tabellini, Guido, 2008. "Bureaucrats or politicians? Part II: Multiple policy tasks," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 426-447, April.
    12. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 905-950.
    13. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 679-705.
    14. Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2012. "Centralization and accountability: theory and evidence from the Clean Air Act," Working Papers 2012/14, Institut d'Economia de Barcelona (IEB).
    15. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
    16. Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2016. "Political Centralization and Government Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 381-422.
    17. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    18. Oded Galor & Omer Moav & Dietrich Vollrath, 2009. "Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 143-179.
    19. Alessandra Bonfiglioli and Gino Gancia, 2010. "The Political Cost of Reforms," Working Papers 507, Barcelona Graduate School of Economics.
    20. James M. Snyder & David Strömberg, 2010. "Press Coverage and Political Accountability," Journal of Political Economy, University of Chicago Press, vol. 118(2), pages 355-408, April.
    21. Alberto Bisin & Thierry Verdier, 2000. ""Beyond the Melting Pot": Cultural Transmission, Marriage, and the Evolution of Ethnic and Religious Traits," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 955-988.
    22. M. Keith Chen, 2013. "The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets," American Economic Review, American Economic Association, vol. 103(2), pages 690-731, April.
    23. Edward L. Glaeser & Giacomo A.M. Ponzetto, 2013. "Shrouded Costs of Government: Political Economy of State and Local Public Pensions Data," Working Papers 660, Barcelona Graduate School of Economics.
    24. Giacomo A. M. Ponzetto, 2008. "Heterogeneous information and trade policy," Economics Working Papers 1296, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2011.
    25. Tommaso Nannicini & Andrea Stella & Guido Tabellini & Ugo Troiano, 2013. "Social Capital and Political Accountability," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 222-250, May.
    26. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
    27. Claudio Ferraz & Frederico Finan, 2008. "Exposing Corrupt Politicians: The Effects of Brazil's Publicly Released Audits on Electoral Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 703-745.
    28. Paola Giuliano, 2007. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 927-952, September.
    29. Licht, Amir N. & Goldschmidt, Chanan & Schwartz, Shalom H., 2007. "Culture rules: The foundations of the rule of law and other norms of governance," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 659-688, December.
    30. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
    31. M. Keith Chen, 2011. "The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets," Cowles Foundation Discussion Papers 1820, Cowles Foundation for Research in Economics, Yale University, revised Dec 2012.
    32. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
    33. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    34. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U. S. Disaster Relief," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 693-728.
    35. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Agénor, Pierre-Richard & Dinh, Hinh T., 2015. "Social capital, product imitation and growth with learning externalities," Journal of Development Economics, Elsevier, vol. 114(C), pages 41-54.
    2. repec:eee:jcecon:v:45:y:2017:i:3:p:644-657 is not listed on IDEAS
    3. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2017. "Housing booms and busts and local fiscal policy," Working Papers 2017/05, Institut d'Economia de Barcelona (IEB).
    4. repec:ksp:journ5:v:4:y:2017:i:1:p:54-63 is not listed on IDEAS
    5. Mark Dincecco & Ugo Troiano, 2015. "Broadening the State: Policy Responses to the Introduction of the Income Tax," NBER Working Papers 21373, National Bureau of Economic Research, Inc.
    6. Alessandra Bonfiglioli & Gino Gancia, 2013. "Uncertainty, Electoral Incentives and Political Myopia," Economic Journal, Royal Economic Society, vol. 0, pages 373-400, May.
    7. David Bartolini & Agnese Sacchi & Domenico Scalera & Alberto Zazzaro, 2018. "The closer the better? Institutional distance and information blurring in a political agency model," Mo.Fi.R. Working Papers 146, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

    More about this item

    Keywords

    social capital; education expenditures; economic growth; elections; government expenditures; imperfect information;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:612. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar). General contact details of provider: http://edirc.repec.org/data/bargses.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.