Social capital, sociopolitical instability, and economic development: A general equilibrium model

Javier Alcántar-Toledo, Yannis P. Venieris

Abstract


This essay describes the main features of a general equilibrium model of social capital and social conflict. According to the model, agents decide to participate in a number of conflict events while, at the same time, accumulate social capital. In the process, the government interacts with the economic actors by discouraging civil disobedience and social violence. The results show that social conflict is decreasing with the accumulation of physical capital, human capital, social capital, and government expenses on social development programs. Output growth in the economy depends positively upon accumulation of all types of capitals and social development funding, and negatively upon social conflict. More importantly, social capital is found to have a considerable positive effect on growth not only directly via investment, as suggested by recent empirical literature, but also indirectly by reducing the levels of social conflict. The model shows that the growth trajectories of the economy display a history-dependent pattern of growth with multiple-equilibria where countries converge to a nontrivial stable steady-state in the long-run. We also provide evidence in favor of the “club convergence” hypothesis which is predicated upon the initial levels of all types of capitals and the underlying level of social conflict.

Full Text:

PDF

References


Alesina, A. and R. Perotti. 1996. “Income Distribution, Political Instability, and Investment.” European Economic Review. Vol. 40, No. 6, pp. 1203-1228. http://dx.doi.org/10.1016/0014-2921(95)00030-5

Almond, G. and S. Verba. 1963. The Civic Culture: Political Attitudes and Democracy in Five Nations. Princeton, NJ: Princeton University Press.

Banks, A.S. 1996. Cross-National Time Series Data. Binghamton, NY: SUNY Press.

Colletta, N.J. and M.L. Cullen. 2002. “Social Capital and Social Cohesion: Case Studies from Cambodia and Rwanda.” Ch. 9 in C. Grootaert and T. van Bastelaer, eds. The Role of Social Capital in Development. An Empirical Assessment. New York: Cambridge University Press.

Hirshleifer, J. 1994. “The Dark Side of the Force.” Economic Inquiry. Vol. 32, pp. 1-10. http://dx.doi.org/10.1111/j.1465-7295.1994.tb01309.x

Inglehart, R. 1990. Culture Shift in Advanced Industrial Society. Princeton, NJ: Princeton University Press.

Knack, S, and P. Keefer. 1997. “Does Social Capital have an Economic Payoff? A Cross-Country Investigation.” Quarterly Journal of Economics. Vol. 112, No. 4, pp. 1251-1288. http://dx.doi.org/10.1162/003355300555475

LaPorta, R., F. Lopez-de-Silanes, A. Shleifer, and R. W. Vishny. 1997. “Trust in Large Organizations.” American Economic Review. Vol. 87, No. 2, pp. 333-338.

North, D.C. 1981. Structure and Change in Economic History. New York: W.W. Norton.

Putnam, R.D. 1993. Making Democracy Work: Civic Traditions in Modern Italy. Princeton, NJ: Princeton University Press.

Stewart, D. and Y. Venieris. 1985. “The Behavior of Savings in Less-Developed Countries.” The Review of Economics and Statistics. Vol. 67, No. 4, pp. 557-563. http://dx.doi.org/10.2307/1924799

Venieris, Y. and D. Gupta. 1986. “Income Distribution and Sociopolitical Instability as Determinants of Savings: A Cross-Sectional Model.” Journal of Political Economy. Vol. 94, No. 4, pp. 873-883. http://dx.doi.org/10.1086/261412

Woolcock, M. and D. Narayan. 2000. “Social Capital: Implications for Development Theory, Research and Policy.” The World Bank Research Observer. Vol. 15, No. 2, pp. 225-249. http://dx.doi.org/10.1093/wbro/15.2.225

Zak, P. J. 2000. “Sociopolitical Instability and the Problem of Development.” In B. Bueno de Mesquita and H. Root, eds. Governing for Prosperity. New Haven, CT: Yale University Press.




DOI: http://dx.doi.org/10.15355/epsj.9.1.19

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.