Social Capital and Economic Growth

Soumyananda Dinda explains that human capital and social capital are closely related and together are useful to realizing economic growth.

While economic total product depends on the productivity of physical capital and human capital, most of us would now, like Professor Dinda, include the productivity of social capital. Research implies that the benefits from social capital derive from its development of connections between people, the “social networks and the norms of reciprocity and trustworthiness that arise from them (Putnam, 2000). Their “underlying cooperation and collective action for mutual benefits and creates the basis for economic prosperity” (Dinda, 2008). Prof. Dinda’s emphasis throughout is how closely related are these two forms. For example education and social connectedness are helped to be created by teachers and students working together. Thus social capital improves productive abilities, but it also influences the capabilities of the human capital (and even of the “government social capital”). We know that human capital depends on the levels of education and healthfulness. The author explains this theory and demonstrates empirically that social connectedness contributes to other forms of capital. But education also improves social connectedness as teachers and students work together.

The author reports a thorough search of the empirical literature supporting each portion of theory. Social capital develops better population health which benefits the productivity of human capital (Loury, 1977, Folland, 2006, 2008, Jusot, et al, 2008). Population health is measured by mortality rates and average life expectancy and these are positively correlated with higher economic product and growth (Dinda, et al, 2006, Sala-i-Martin, 1997A and 1997B, and Bhargava, et al, 2001).  Health also contributes to economic growth directly (Barro, 1991, Barro and Lee, 1996) through its influence on the productivity of the workers.

Human capital benefits social capital and adds to its positive impact on economic growth (Romer, 1986, Barro, 1991, Barro and Sala-i-Martin, 1995). These social connections in turn contribute directly to health in empirical tests (Loury, 1977, Folland, 2006, 2008, Jusot, et al, 2008). In turn human capital contributes to and provides a base for social capital (Lucas, 1988). The close relationship between these forms of capital also imply the possibility for governments to invest in growth by encouraging and developing education and health, and by helping to the development of norms, trustworthiness, truth, and reciprocity in society (Steger, 2002, Dinda, 2008).

Conclusions:

Professor Dinda thus explains and demonstrates in this article that human capital and social capital are closely related and together are useful to realizing economic growth. Investment in both can be achieved through policies directed at both of these factors. Complete references can be found in the original chapter (Ch 18 in Elgar’s Companion to Social Capital and Health).

Professor Dinda is Professor of Economics at the Department of Economics, University of Burdwan, India. 

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Also on ElgarBlog:

Social Capital in Epidemiology by Martin Lindström. Read Martin Lindström’s chapter Social capital in epidemiology

Why Trust is Good for your Health by Martin Ljunge. Read Martin Ljunge’s chapter Trust promotes health: addressing reverse causality by studying children of immigrants 

The Importance of being Social –Sherman Folland investigates the influential role social capital plays in mental health and physical wellbeing.

Religious Capital, Social Capital and Health Ephraim Shapiro and Chen Sharony explore the link between religion and health

Does Health Affect Social Capital Hope Corman, Kelly Noonan, and Nancy E. Reichman examine the relationship between health and social capital.