Bonding and Bridging Social Capital and Economic Growth
CentER Discussion Paper Series No. 2009-27
39 Pages Posted: 13 May 2009
Date Written: February 28, 2009
In this paper we develop a formal model of economic growth and two types of social capital. Following extant literature, we model social capital as participation in two types of social networks: first, closed networks of family and friends, and, second, open networks that bridge different communities. Higher levels of social capital may crowd out economic growth through a reduction of working time. At the same time, participation in intercommunity networks reduces incentives for rent seeking and cheating, promoting economic growth. We test our hypotheses in a sample of European regions using unique data from the European Value Studies (EVS). Our findings show that it is important to distinguish between the nature of the social interaction.
Keywords: social capital, economic growth, Europe, regions
JEL Classification: O40, R11, Z13
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