Social Capital and Economic Growth: An Analysis in South America

Background Social capital has emerged as a key variable in explaining regional economic disparities, yet its multidimensional nature complicates measurement and policy design. In the South American context, characterized by institutional fragility and inequality, the impact of social capital on economic growth remains empirically ambiguous. Methods This study employs a quantitative methodology using panel data from 2007 to 2023 across nine South American countries. Data is sourced from the Legatum Prosperity Index, focusing on five elements of social capital: family relationships, social networks, interpersonal trust, social tolerance, and civic participation. Econometric analysis is conducted using instrumental variables and two-stage least squares models to address endogeneity. Results The econometric findings reveal heterogeneous effects among dimensions of social capital. Civic participation and family relationships exhibit a significant positive association with economic growth, while social tolerance and interpersonal trust show negative or inconsistent impacts. Notably, social networks instrumentalized in the model have a negative and significant relationship with growth, suggesting potential inefficiencies in their current form. The presence of endogeneity and multicollinearity among variables highlights the complexity of causality in this domain. Conclusions Social capital plays a critical, yet context-dependent, role in fostering economic development in South America. While some dimensions such as civic engagement promote inclusive growth, others may reinforce exclusion or inefficiencies depending on institutional quality and social structure. Policymakers should therefore target specific aspects of social capital, promoting civic participation and inclusive networks while addressing institutional weaknesses. Future research should explore longitudinal dynamics and the interaction of social capital with digitalization and labor market transformation.