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The effect of social capital on economic growth is examined using linear regression analysis and U.S. county-level data. Results reveal that social capital has a statistically significant, independent positive effect on the rate of per-capita income growth.

In the search for explanations of persistent differences in economic growth rates, the conditional convergence growth model has introduced the possibility of incorporating a wide set of factors as determinants of growth. Controlling for spatial dependence, we assess the contribution of differences in social and institutional variables on growth rates of per capita income for counties in the United States. The empirical results indicate that, ceteris paribus, social and institutional variables explain some of the differences in convergence rates among counties. In particular, (i) ethnic diversity is associated with faster rates of economic growth; (ii) higher levels of income inequality are associated with lower rates; and (iii) higher levels of social capital have a positive effect on economic growth rates. JEL classification: O40, R11

State and local governments increasingly look to entrepreneurship as a means of stimulating economic growth. However, can the public sector play a role in promoting entrepreneurial activity—and if so, what should that role be? The authors investigate independent effects of financial and human entrepreneurial capital and ideas on entrepreneurial activity in the 50 states. Financial entrepreneurial capital has an inverse U-shaped relationship with entrepreneurial activity, suggesting there are limits to using increasing amounts of financial capital to stimulate entrepreneurship, all else being equal. The authors rank each state in terms of predicted and actual entrepreneurial activity scores and propose a preliminary measure of the entrepreneurial “climate” of each state. Although most states are ranked near where casual analysis might place them, the authors find that others have predicted values that differ significantly from actual values. This suggests that climate may be an important factor in stimulating entrepreneurial activity.

Various forms of cooperation among local governments have long been advocated as means to aggregate resources and demand in rural areas so that public services and infrastructure can be improved. This research assesses the degree of multicounty collaboration in rural parts of the Tennessee Valley. It uses both a regression model and key informant interviews to establish the factors that stimulate and impede collaboration. Our work finds that while there is considerable collaboration already taking place in the Tennessee Valley Authority region, there are factors, such as a lack of strong advocates for cooperative projects, suspicion of neighboring communities, and differentials in available resources that impede collaboration. Conversely, there are supporting factors, including financial inducements, opportunities for officials to interact, and the presence of a neutral facilitator that can increase the amount of collaboration.