Social Capital and Economic Growth in Europe: Nonlinear Trends and Heterogeneous Regional Effects

Most of the literature focused on the social capital-growth nexus has followed the one-size-fits-all approach, neglecting that regional disparities might modify this relationship. This article analyses the role of two social capital indicators on the growth of 237 European regions in the period 1995-2007 by implementing non-parametric regression, which relaxes the linearity assumption and allows the data to give the underlying functional form. The results show that social capital effects on growth are nonlinear. Parameter heterogeneity could also be examined, showing heterogenous effects across regions and over time. In particular, social capital is mostly negative in regions from Eastern and Central Europe during the first years of transition from socialism to market economies. However, this pattern has changed in the more recent period.