We present a tractable stochastic endogenous growth model that explains how social capital influences economic development. In our model, social capital increases citizens' awareness of government activity. Hence, it alleviates the electoral incentives to under- invest in education, whose...

Endogenous growth theory suggests that human capital formation plays a significant role for the ‘wealth and poverty of nations.’ In contrast to previous studies which denied the role of human capital as a crucial determinant of for really long-term growth, we confirm its importance....