Investment in social capital: dynamics of a two sector growth model and implications for public investment in education and research

The project will model the interaction over time between physical investment, social investment in skills and knowledge, economic growth and economic welfare. It will clarify circumstances under which appropriate public policy may require private and social returns to diverge on a transitional growth path. Data from Australia, the USA and other countries will be analysed to determine the parameters of the model for each country. This will enable an assessment of the extent to which countries have under-invested or over-invested in physical or social capital. The results will inform public debate on appropriate policies for investment in social capital.