Given the nature of social capital, the foundations of its formation, and the
important role it plays in economic development, a hypothesis of a possible correlation
between social capital and income distribution can be put forward. This research is an
attempt to enrich the small number of analyzes related to the testing of this hypothesis by
discussing the issue in the context of the interaction between social capital and income
distribution in Armenia and in general. To address the research problem, the tools of
correlation and panel regression analysis are used and compared with the results of the
expert survey dedicated to the assessment of public social capital in the Republic of
Armenia. As a result of the analysis of both the Republic of Armenia and the panel data of
different countries, a statistically significant relationship is reported between the social
capital, its elements, and income distribution, which is also in line with the opinions of
participant experts on the same issue. Obtained results are summarized by causal
inference terminology and a causal graph of relationships is proposed.
The article examines the historical prerequisites for the emergence of the concept of the principle of diminishing returns of production factors. The analysis of the manifestation of this principle in the context of all factors of production. As a result of the analysis of the characteristics of human capital, an approach is proposed according to which the principle of diminishing marginal return does not apply to investments in human capital at the macrolevel and in the long term. It is shown that human capital at the macro level and in the long term (in the context of long waves of economic cycles) shows a trend of increasing returns. And it is the increasing return on investment in human capital that prevents the manifestation of diminishing returns on other factors of production. The reasons that determine the increasing return of human capital, as opposed to the physical, are systematized, among which: it, during a certain period of the process of use, improves, grows in quality and accumulates; does not disappear without a trace, contributes to the growth of human capital of other individuals, investments in human capital provide positive externalities, the component of human capital is a resource of knowledge, is inexhaustible and shows an exponential growth trend, the process of investing in human capital is greatly influenced by national, historical, psychological and socio cultural factors, investment in human capital, as a rule, provide a high rate of return.
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