Essays on the dynamics of social capital and external debt in low-income countries

This dissertation studies two important issues in political economy of development. The first one is the generation and dynamics of social capital and its relationship with growth. The second topic studies the channels in which external debt affects growth in low-income countries.; In the first essay, which is joint with Philip Denkabe, we construct a simple growth model in which social capital is created by social participation of economic agents. We assess the generation of social capital and its role in human capital accumulation and economic growth. We also evaluate the interaction between social capital, human capital, community and policy implication for social capital generation. The model shows a trade-off between social capital and economic growth. The relationship between social capital and other resources depend on the nature of the economy. The model has a very dark implication for the simultaneous improvement in both social capital and consumption.; In the second essay, which is joint with Benedict Clements and Rina Bhattacharya, we examine the channels through which external debt affects growth in low-income countries. Our results suggest that the substantial reduction in the stock of external debt projected for heavily indebted countries (HIPCs) would directly increase per-capita income growth by about I percent per annum. Reductions in external debt service could also provide an indirect boost to growth through their effects on public investment. If half of all debt service relief were channeled for such purposes without increasing the budget deficit, then growth could accelerate in some HIPCs by an additional (1/2) percentage point per annum.