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Barriers to Financial Institutional Development: A Preliminary Theoretical Exploration of Social Capital, Growth and Institutional Development

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  • Ammar Shamaileh

    (Franklin & Marshall College)

Abstract

This note sets forth a preliminary theoretical analysis of the role that social capital plays in the decision faced by states to develop their financial institutions. While financial institutional development has been considered to play a role in both translating portfolio and foreign direct investment into growth, many states choose not to develop their financial institutions. This article analyzes this problem through a simple signaling model related to the underlying levels of social capital within a state, and finds that social capital's effect on the decision to develop financial institutions is tied to the ability of social capital to translate investment into growth.

Suggested Citation

  • Ammar Shamaileh, 2018. "Barriers to Financial Institutional Development: A Preliminary Theoretical Exploration of Social Capital, Growth and Institutional Development," Economics Bulletin, AccessEcon, vol. 38(1), pages 186-195.
    • Handle: RePEc:ebl:ecbull:eb-17-00871
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    References listed on IDEAS

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    More about this item

    Keywords

    Social Capital; Economic Growth; Institutional Development; FDI;
    All these keywords.

    JEL classification:

    • H8 - Public Economics - - Miscellaneous Issues
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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