The Role of Social Capital in Economic Development. Investigating the Causal Nexus through Structural Equations Models

This paper carries out an empirical assessment of the causal nexus connecting social capital’s diverse aspects to the “quality” of economic development in Italy. The analysis accounts for three main social capital dimensions (i.e. bonding, bridging and linking social capital) and measures them through synthetic indicators built by means of principal component analyses performed on a dataset including multiple variables. The quality of development is measured through human development and indicators of the state of health of urban ecosystems, public services, social protection, gender equality, and labour markets. The causal relationship between social capital’s and development’s different dimensions is then assessed through structural equations models. The analysis in this paper provides relevant a proof of Putnam’s claims on the positive role of civil society organizations in development processes.