The Effect of Social Capital on the Economic Growth:A Theoretical Framework

The social capital is one of the new concepts which have been welcomed in economic studies.. But there is always a dissension among economic thinkers about how this social variable affects the economic production. In this study we have used a theoretical microeconomic framework accompanied by the concept of transaction costs to expand a new theoretical basis for explaining how the social capital affects the production and economic growth. The necessary data of all provinces of Iran for the period of 1379-1384 to test our research hypotheses have been used. The results of the experimental test show that during the period of study, the social capital, such as physical capital and human capital, have significant and positive effect on economic growth. The production elasticity of the social capital, as two other capitals, has been between zero and one; suggests that the economy is in the second stage of production function.