| This essay presents a general equilibrium model according to which heterogeneous agents decide on the number of political and conflict events they want to participate. They can choose between anomic and more violent events while, at the same time, accumulate social capital. In the process, the government interacts with the various economic actors by discouraging civil disobedience and social violence while it protects property rights.;The theoretical and empirical results show that the number of social conflicts is decreasing with the accumulation of physical capital, social capital, human capital and government expenses on social development programs. Output growth in the economy depends positively upon accumulation of all types of capitals and social development funding, and negatively upon social conflict. More importantly, social capital is found to have a considerable positive effect on growth not only directly via investment, as suggested by recent empirical literature, but also indirectly by reducing the levels of internal conflict and sociopolitical instability (hereafter SPI).;The model shows that the growth trajectories of the economy display a history-dependent pattern of growth with multiple-equilibria and it consists of three phases; that is, a poverty trap, a period of transitional dynamics and a balanced growth path where growth is endogenous. On the other hand, while our empirical evidence supports the first two stages of the trajectory, it also shows that countries converge to a non-trivial stable steady-state as opposed to growing endogenously. We also provide evidence in favor of the "club convergence" hypothesis which is predicated upon the initial levels of all types of capitals and the underlying level of social conflict. The empirical evidence also confirms the importance of the relationship between social capital and growth within the context of formal institutions. |
