Abstract:
This paper models the individual-level social capital effect the credit market
constraints that reduce the accumulation of costly human capital. Human capital,
in turn, improves an individual’s income as well as the bequest that they intend to
leave for their children. It also helps reduce inequality across a country. Finally, the
model shows that investment in social capital has a negative relationship with the
interest rate,so that the initial inherited bequest of every individual affects the output
and investment in the short-run, as well as in the long-run.
