How can inequality undermine the development of a country - Essay Example

ir contribution to the growth process while the latter “provides explicitly the growth path subject to technical change due to division of labor”. They posited that scientific, technical and commercial specialization occurs due to the division of labor. Labor is also of the factors that affects economic growth as mentioned by Lindsey (1997). Aside from the growth rate of capital stock, the quantity and quality of labor, and the improvements in the way capital and labor are used are important determinants of economic growth, said Lindsey (1997) further.

Adding capital is could imply corporate downsizing and layoff hence it is better to examine labor as factor of growth (Lindsey, 1997). The laborers are humans; they are beings with various social connections and thus, they also have the one referred to as social capital. The process of norm creation leads to cooperation among groups and this makes them related with virtues such as honesty, maintenance of commitments, fulfillment of duties, and reciprocities (Castano, 2007). The effects of social capital to the economic growth have been studied by Castano (2007) through the following sources: family, associations, informal links, links in the workplace and the State.

In these social connections, trust networks are also made giving rise to reciprocity among members, contributing to one’s social capital (Castano, 2007). Castano (2007) noted a positive effect of social capital to the economy in the family and associations network when mobilize their financial resources to create companies or keep them running. Transaction costs can be also reduced by social capital since this could alleviate some costs required by a legal norm as said by Castano (2007). As for the State, Castano (2007) mentioned three of its important roles that lead or promote social capital generation and these are the following: regulating the legal framework, promoting associative activities, and providing public education.

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