Social capital, government expenditures, and growth

Countries with greater social capital have higher economic growth. We show that socialcapital is also highly positively correlated across countries with government expenditureon education. We develop an infinite-horizon model of public spending and endogenousstochastic growth that explains both facts through frictions in political agency whenvoters have imperfect information. In our model, the government provides servicesthat yield immediate utility, and investment that raises future productivity. Voters aremore likely to observe public services, so politicians have electoral incentives to underprovidepublic investment. Social capital increases voters' awareness of all governmentactivity. As a consequence, both politicians' incentives and their selection improve.In the dynamic equilibrium, both the amount and the efficiency of public investmentincrease, permanently raising the growth rate.

Capital formation in machinery and industrialization. Chile 1844-1938

The present paper revisits an old theme in Latin American and Chilean economic history; the early industrialization in the XIX - XX centuries. The difference with previous approaches is the elaboration of new quantitative series of Chilean machinery investment in the long run and its relative prices and composition, in the period when some authors have sited the beginning of the industrialization in the continent. Initial findings, based on the participation of capital formation in machinery imports and GDP, do not reinforce the idea of early industrialization in Chile.

Human capital and regional development

We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world s surface and 97 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and possibly human capital externalities help understand the data.

Bowling for fascism: Social capital and the rise of the Nazi Party in Weimar Germany, 1919-33

Social capital a dense network of associations facilitating cooperation within a community typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially "dark side" of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party's triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations veteran associations and non-military clubs, "bridging" and "bonding" associations positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany's first democracy.

Human capital, the structure of production and growth

Do high levels of human capital foster economic growth by facilitating technology adoption? If so, countries with more human capital should have adopted more rapidly the skilled-labor augmenting technologies becoming available since the 1970 s. High human capital levels should therefore have translated into fast growth in more compared to less human-capital-intensive industries in the 1980 s. Theories of international specialization point to human capital accumulation as another important determinant of growth in human-capital-intensive industries. Using data for a large sample of countries, we find significant positive effects of human capital levels and human capital accumulation on output and employment growth in human-capital-intensive industries.

Technical inefficiency and public capital in US States: A stochastic frontier approach

This paper estimates a translog stochastic frontier production function in the analysis of all 48 contiguous U.S. states in the period 1970-1983, to attempt to measure and explain changes in technical efficiency. The model allows technical inefficiency to vary over time, and inefficiency effects to be a function of a set of explanatory variables in which the level and composition of public capital plays an important role. Results indicated that U.S. state inefficiency levels were significantly and positively correlated with the ratio of public capital to private capital. The proportion of public capital devoted to highways is negatively correlated with technical inefficiency, suggesting that not only the level but also the composition of public capital influenced state efficiency.

Convertibility, currency controls and the cost of capital in Western Europe, 1950-1999

For most of the post-war period, Europe s capital markets remained largely closed to international capital flows. Thispaper explores the costs of this policy. Using an event-study methodology, I examine the extent to which restrictions ofcurrent and capital account convertibility affected stock returns. The delayed introduction of full currency convertibilityincreased the cost of capital. Also, a string of measures designed to reduce capital mobility before the ultimate collapseof the Bretton Woods System had considerable negative effects. These findings offer an explanation for the mountingevidence suggesting that capital account liberalization facilitates growth.