Abstract

The paper presents a simplified economic growth model with social capital, as an alternative for sustained long-term growth. The intuition behind the model suggests its application for developing economies that historically have focused their attention on the accumulation of physical capital and not on endogenous factors such as human capital and social capital. The model is considered as a Cobb-Douglas production function that includes three types of capital: physical, human and social. From the model, we obtain evidence from estimates for the Ecuadorian economy in the period 1980-2015, which underlie the main endogenous sources regarding physical capital. As a result, some policy implications are highlighted.

Highlights

  • The discussion on economic divergence between countries, generally from the same region, has aroused the interest of economics in analyzing and explaining the growth of both, developed and developing countries, and in this way, to be able to establish the preponderant factors of the existing socio-economic gap between them

  • As the basis, it is considered the national income identity where GDP, Yt, is formed of: private consumption (Ct), which represent the purchases made by households for themselves; investment (It), which are the physical capital purchases made by companies to be able to operate in the market; the public expenditure (Gt) that are the outflows of money by the government for public investment; and net exports (NXt), which is the rest of the production marketed by the country's external sector

  • The endogenous economic growth model presented here is a simplified extension of the neoclassical production function (Cobb-Douglas type), since it is part of the same initial methodology of the Solow (1956) and Swan (1956) models, and it extends towards a mathematical analogy of the Barro (1990) model that considers public spending and taxes

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Summary

Introduction

The discussion on economic divergence between countries, generally from the same region, has aroused the interest of economics in analyzing and explaining the growth of both, developed and developing countries, and in this way, to be able to establish the preponderant factors of the existing socio-economic gap between them. As an alternative to the neoclassical theory led by Solow (1956) and Swan (1956), the "new theory" of growth, often called as an endogenous theory of economic growth, has emerged. According to Argandoña, Gámez, & Mochón (1997), the origin of this new theory was motivated because of the dissatisfaction of the exogenous explanations of productivity growth in long term. This gave rise to models in which the determinants of the growth were endogenous, for example the externalities of capital through the processes of learning-bydoing or knowledge-spillovers, human capital, R&D, public expenditure and taxes, social capital, local development processes, etc

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