Social Capital and Market Centralisation: A Two-Sector Model
We develop a two-sector model to analyze which kind of social organization generates social capital. The hypothesis is that social capital must be added as an important production factor when considering decentralization of production. Thus, market centralization processes in a capitalist society eventually may fragmentize and thus destroy social capital if the positive externality of local production and social capital is not taken into account. To our knowledge, no such attempt to model social capital has yet been undertaken and this gap or ‘missing link’ in economic debates has to be developed to grasp a more holistic understanding of the big differences in the wealth of nations or regions. The model shows that if the policy maker decides to centralize the economy, then the economy moves from an potentially stable equilibrium to an unstable one that may under certain condition even fluctuate forever.
|Date of creation:||10 Dec 2004|
|Date of revision:|
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00-5, University of Aarhus, Aarhus School of Business, Department of Economics.
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