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A Dynamic Approach to the Relationship between Inequality, Social Capital and Institutions


  • Diego Caramuta

    (CONICET & Universidad Nacional del Sur)


One of the main objectives of this paper is to show the dynamics that relates inequality, social capital and institutions. The most important result is that these dynamics could generate multiple equilibria. Thus, we can identify two types of equilibria: one with a low level of social capital and high level of inequality, supported by institutions created endogenously by the community; and on the other hand, an equilibrium with a high level of social capital, low inequality and institutions that favor social equality. The analysis made in this paper can be seen as a contribution to the literature on why a society may attain high levels of institutional development and social integration.

Suggested Citation

  • Diego Caramuta, 2005. "A Dynamic Approach to the Relationship between Inequality, Social Capital and Institutions," Development and Comp Systems 0506009, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0506009
    Note: Type of Document - pdf; pages: 20

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    References listed on IDEAS

    1. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
    2. 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.
    3. Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
    4. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
    5. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
    6. Partha Dasgupta, 2005. "Economics of Social Capital," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages 2-21, August.
    7. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2000. "The Economic Approach to Social Capital," NBER Working Papers 7728, National Bureau of Economic Research, Inc.
    8. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    9. Blume,L.E. & Durlauf,S.N., 2000. "The interactions-based approach to socioeconomic behavior," Working papers 1, Wisconsin Madison - Social Systems.
    10. Durlauf,S.N., 1999. "The case "against" social capital," Working papers 29, Wisconsin Madison - Social Systems.
    11. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
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    More about this item


    Inequality; Social Capital; Institutional Arrangement;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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