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Social Capital, Government Expenditures, and Growth

  • Ponzetto, Giacomo AM
  • Troiano, Ugo

We present a tractable stochastic endogenous growth model that explains how social capital influences economic development. In our model, social capital increases citizens' awareness of government activity. Hence, it alleviates the electoral incentives to under-invest in education, whose returns are delayed and less visible to voters. In equilibrium, higher social capital raises the average output growth rate and reduces its volatility by increasing public investment in education while making its returns higher and less variable. Our theory also predicts that a more unequal distribution of social capital reduces public education expenditures. We provide suggestive cross-country evidence consistent with these predictions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9891.

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Date of creation: Mar 2014
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Handle: RePEc:cpr:ceprdp:9891
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  1. Timothy Besley & Robin Burgess, 2002. "The Political Economy Of Government Responsiveness: Theory And Evidence From India," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1415-1451, November.
  2. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  3. Oded Galor & Omar Moav & Dietrich Vollrath, 2006. "Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions, and the Great Divergence," DEGIT Conference Papers c011_001, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Gino Gancia & Alessandra Bonfiglioli, 2012. "The Political Cost of Reforms," 2012 Meeting Papers 291, Society for Economic Dynamics.
  5. Edward L. Glaeser & Giacomo A. M. Ponzetto, 2012. "Shrouded costs of government: The political economy of state and local public pensions," Economics Working Papers 1336, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2013.
  6. Sangnier, Marc, 2013. "Does trust favor macroeconomic stability?," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 653-668.
  7. 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.
  8. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
  9. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
  10. Edward L. Glaeser & Giacomo A. M. Ponzetto & Jesse M. Shapiro, 2004. "Strategic Extremism: Why Republicans and Democrats Divide on Religious Values," NBER Working Papers 10835, National Bureau of Economic Research, Inc.
  11. 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 222-50, May.
  12. 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).
  13. Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2012. "Centralization and Accountability: Theory and Evidence from the Clean Air Act," CERIS Working Paper 201213, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  14. 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, 09.
  15. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U.S. Disaster Relief," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 693-728, 05.
  16. Giacomo Ponzetto, 2011. "Heterogeneous Information and Trade Policy," Working Papers 596, Barcelona Graduate School of Economics.
  17. Oded Galor & Omer Moav, 2000. "Natural Selection and the Origin of economic Growth," Working Papers 2000-18, Brown University, Department of Economics.
  18. repec:dgr:kubcen:2012033 is not listed on IDEAS
  19. Federico Boffa & Amedeo Piolatto & Giacomo Ponzetto, 2015. "Should Different People Have Different Governments?," Working Papers 656, Barcelona Graduate School of Economics.
  20. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  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, MIT Press, vol. 115(3), pages 955-988, August.
  22. Edward L. Glaeser & Giacomo Ponzetto, 2013. "Shrouded Costs of Government: Political Economy of State and Local Public Pensions Data," Working Papers 660, Barcelona Graduate School of Economics.
  23. 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.
  24. James M. Snyder, Jr. & David Strömberg, 2008. "Press Coverage and Political Accountability," NBER Working Papers 13878, National Bureau of Economic Research, Inc.
  25. Amir N. Licht & Chanan Goldschmidt & Shalom H. Schwartz, 2003. "Culture Rules: The Foundations of the Rule of Law and Other Norms of Governance," William Davidson Institute Working Papers Series 2003-605, William Davidson Institute at the University of Michigan.
  26. 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.
  27. Ferraz, Claudio & Finan, Frederico S., 2007. "Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes," IZA Discussion Papers 2836, Institute for the Study of Labor (IZA).
  28. 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.
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