Adam Smith Business School

Dr Giacomo Ponzetto, Centre de Recerca en Economia Internacional (CREI)

"Social Capital, Government Expenditures and Growth"
Thursday, 26 October. 3 pm
Room 355 Gilbert Scott Building

Abstract

This paper shows that social capital increases economic growth by raising government investment in human capital through better political incentives and selection. We provide empirical evidence that a greater share of output is spent on public education where social capital is higher, both across countries and across U.S. states. We develop a theoretical 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 diffusion of information makes this knowledge more widespread among voters. As a result, social capital alleviates myopic political incentives to underinvest in human capital. It also helps voters select politicians who 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. 

Bio

Giacomo A. M. Ponzetto is a Senior Researcher at the Centre de Recerca en Economia Internacional (CREI) and the Institute of Political Economy and Governance (IPEG), and a professor at Universitat Pompeu Fabra (UPF) and the Barcelona School of Economics (BSE). He has also been a Visiting Professor at Harvard and Bocconi. He is a Research Fellow at the Centre for Economic Policy Research (CEPR) and an editorial board member of the Review of Economic Studies, having previously been an associate editor of the Journal of the European Economic Association. He received his PhD from Harvard University in 2009.

His research interests include political economics, economic geography and international trade. He has published articles in numerous scientific journals on topics such as the geographic structure of government; the impact of asymmetric information on politics and economic policy-making; legal institutions and the development of regulation; and urban growth dynamics, human capital and innovation.

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First published: 23 October 2023