Social Capital, Government Expenditures and Growth / Giacomo A.M. Ponzetto, Ugo Troiano.

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Ponzetto, Giacomo A.M

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24533.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w24533 (Browse shelf(Opens below))	Not For Loan

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April 2018.

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.