Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23623
Authors: 
Josten, Stefan Dietrich
Year of Publication: 
2005
Series/Report no.: 
Diskussionspapier / Helmut-Schmidt-Universität Hamburg, Fächergruppe Volkswirtschaftslehre 36
Abstract: 
This paper analyzes a heterogeneous-agents endogenous-growth model incorporating both transaction costs and social capital. An individual can either become an active part of the society?s middle-class networks of trust and mutual cooperation, thus making a positive contribution to overall social capital. Alternatively, the individual can stay socially disintegrated and free-ride on the community?s social capital. Due to the existence of asymmetric information, agents face a moral-hazard problem on the credit market which gives rise to transaction costs and can be alleviated by private, governmental or social governance structures. An increase in inequality and shrinking of the middle class depresses the community?s social capital, which, in turn, weakens the informal social governance system and increases economy-wide transaction costs. As a result a more unequal distribution lowers the economy?s growth rate.
Subjects: 
Social Capital; Inequality ; Middle Class ; Economic Growth ; Distribution
JEL: 
O41
D3
Z13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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