Social Capital and Investment Externalities in R&D: New Externalities

Resumo / Abstract:
We introduce social capital in an endogenous growth model with physical capital, human capital and varieties, and we compare the market with the efficient solutions. As social capital is not tradable in the market and it favours research networks, it introduces new externalities in this framework. These externalities induce the market to invest less in social capital than a social planner would do and decrease the tendency to underinvestment in R&D. We quantify the distortions in the model. In some conditions, the new distortions are strong enough to overcome the usual result of underinvestment in R&D.

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