Economic growth- A matter of trust? : An empirical investigation of the relationship between social capital and economic growth in developed and developing countries.

The growth literature has put much emphasis on explaining the role of physical capital, human capital, innovation and institutions on economic growth. However, sociologists raise the importance of understanding the structures of social relationships because they help shape economic actions. It is not until recently that the concept of ‘’social capital’’ has been at the forefront of economic debates. While the vast majority of studies have shown that social capital is unconditionally good for economic growth, several studies argue that the impact of social capital depends on a country’s level of development. Therefore, an OLS regression is estimated using a panel data from 53 developed and developing countries to analyze the relationship between social capital, proxied by trust and GDP/capita growth. The results suggest that social capital is significant and positively related to GDP/capita growth in developed and developing countries. However, the relationship between social capital and GDP/capita growth is much stronger in developing countries. Policymakers can use this valuable insight while making growth-strategy decisions, especially in developing countries