of socioeconomic that was created by Irma Adelman and Cynthia Taft Morris in the early
1960s. This paper demonstrates a strong correlation (0.60) between social development
and growth rate for more than 45 countries between 1960 and 1985. Regression analysis
also approves this result (Temple et al.). The result of this paper shows that economists
that want to forecast economic growth should consider non-economic factors in addition
to economic variables. According to Libby and Sharp “social capital is not just an input
into human development, but a “shift factor” affecting other inputs, since it tends to
enhance the benefits of investment in human and physical capital. For example,
investments in training can be multiplied by the input of social capital as the
strengthening of social ties enables people to better learn from others” ( Warschauer).
Stating Rupasingha et al. “a major economic effect of social capital is that it
reduces information and transaction costs. When transaction costs and the costs of
gathering and disseminating information are reduced, less risk is involved and more
exchange takes place, thus enlarging the scope of transactions and interactions.
Conversely, a lack of social capital results demand for more external controls such as
tougher law enforcement, security systems, monitoring and enforcement. Another
contribution of social capital is that it affects the supply of certain public goods. The
provision of public goods is subject to free riding or shirking if most users do not
participate in joint actions to make the provision of public good a success. In these
situations conventional theories of collective action have concluded that individuals will
resort to strategic behavior by refusing to contribute toward the public good in order to
obtain a benefit far greater than the cost they have to pay. When social capital is present,
externalities are internalized, which has the effect of eliminating or reducing the free rider