Measuring the Impact of a State’s Legal and Organizational Framework on Social Capital through System Dynamics Modeling

The scientific community recognizes the critical effect of social capital on economic development; social capital benefits society with lower transaction costs and less opportunistic behavior among institutions, thus representing a key factor contributing to the quality of a country’s global competitiveness. At a macro level of analysis, social capital arises through formalized institutional relationships, structures and public policies constituting a state’s organizational and legal framework. Good public management, services and transparency foster in individuals their social commitment, honesty and a solid trust toward public institutions – all proxies of social capital. In contrast, bad public administration depletes social capital. The literature has heretofore been more successful at documenting the beneficial impact of social capital than at developing management tools for devising policies. The present research, tailored on the Italian state, may help fill this gap in literature through the design of a management tool to help policy makers assess the social capital created or depleted by public policies. The system dynamics model provided in this study, which includes such information in policy design, may also lead policy makers to select policy alternatives that produce the best results for social capital growth.