A two-sector model of economic growth with social capital accumulation

tIn this paper we analyze a two-sector growth model in which the utility function is not additively separablein consumption and “quality leisure time”. Differently from the main body of theoretical literature onquality leisure, we assume that the “productivity” of leisure is not determined by the stock of humancapital but instead by the quality of social environment, which in turn depends on the joint action ofthe economy-wide average leisure and of the stock of social capital. In this context we show that thetime evolution of social capital may exhibit an inverted-U shaped path, according to which the stock ofsocial capital, initially increasing, becomes definitively decreasing. This result is consistent with severalempirical studies about the time evolution of social capital in industrialized economies (see e.g. RobertPutnam, 1995, 2000). Furthermore, we show that the inverted-U shaped evolution of the stock of socialcapital can be observed only if the balanced growth path is locally indeterminate.