Assessment of the Interaction of Social Capital and Income Inequality

Abstract

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.