Social Capital, Investment and Economic Growth: Evidence for Spanish Provinces

Abstract

This article analyzes the impact of social capital on regional economic growth in Spain during the 1985-2005 period. The literature in this context is virtually nonexistent and, in addition, whereas most studies, regardless of their context, have used survey data in order to measure social capital, we use a measure whose construction is based on similar criteria to other measures of capital stock. Compared with more standard measures of social capital and trust, our measure is available with a high level of disaggregation, and with annual frequency for a long time period. Following a panel data approach, our findings indicate that social capital has a positive impact on GDP per capita growth in the context of Spanish provinces, implying that “social features” are important for explaining the differences in wealth one might find across Spanish provinces. We also explore the transmission mechanisms from social capital to growth, finding a highly positive relation between social capital and private physical investment.

Keywords: growth, investment, province, social capital

JEL Classification: R11, Z13, O18