Revisiting the Role of Social Capital in Development

In this paper, I have examined the role of social capital in economic growth and institutional development by using panel data 1990-2010. I have used two variables as measures of social capital - the Indices of Social Development (ISD) data of a. interpersonal safety and trust and b. civic activism. For measuring institutions, I have used the ICRG bureaucratic quality index and the Polity 2 index of the Polity IV data. I have used cross sectional and pooled panel OLS, and panel fixed and random effects models to examine the impacts. My panel data analysis strongly supports the positive and significant contributions of civic activism on economic growth. However, my findings do not confirm significant impact of trust on growth. My estimation results give some indicative evidence of a significant and positive effects of civic activism on the political institution based polity 2 index, thus lending support in favour of the view that Citizens matter for democracy.