Abstract
This work provides some evidence for the Italian regions that social capital, under a broad definition, can have a positive impact on development outcomes. Our empirical analysis includes measures of social capital related to the enforcement of formal norms, the extent of social networks, the provision of local public goods. We show that in the less developed regions of Italy, the so-colled Mezzogiorno, the level of social capital is lower compared to the advanced regions and, at the same time, the productive activities born a smaller share of the cost due to the social capital deficit. This result leads to a «wrong» incentive towards the underinvestment in social capital and locks the Southern regions in a trap at a low level of both economic development and social capital development. Absent suitable shocks or policy interventions, this out-come is self-reinforcing.
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