Brown Bag Seminar | Social Capital, Government Expenditures and Growth

This Monday 1st of October, Dr. Ugo Troiano will be presenting his research. Dr  Troiano works at the University of Michigan as an Assistant Professor of Economics. He is also a Faculty Research Fellow NBER in Political Economy and Public Economics, Research Associate at the Office of Tax Policy Research and Faculty Associate in the Institute for Social Research CPS.

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 discussion 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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