The effect of institutions and social capital on economic growth

The reasons of the observed differences among the countries' economic performance has been considered as a study subject for economists and politicians for many years. As the tools used by economists to explain these differences are constraint in explanatory level, it lead to the reveal of new searches for instrument in not only economic sphere but also all social sciences. In this process, one of the subjects discussed for the researches revealed as the institution concept.The effects of institutions on economic growth realize by means of various channels. One of these channels is the internalization of institutions by society and, owing to this, the environment of trust. The confidence level of countries and the collocations of individuals can be important determiners of their economic performances by getting involved in production process. The revealed networks of communication based on trust can be defined as the social capital of country. Especially, the roads hit by the countries in the process of growth after the industrial revolution cannot be explained only by physical capital accumulation. In this new phase, along with the transformation into information society, in addition to human capital, social capital has to be included in the conducted analysis as well.In the direction of this view, in this study the effects of the social capital level of institutions and society on economic growth were questioned, and an empirical research was performed on 69 countries which are included in various income groups by means of cross section data analysis. As to the estimation results, a statistically significant- positive relation was found between the institutional quality rank with social capital level of the countries which have middle income threshold and their economic growth, on the other hand a statistically meaningful relation between the institutional quality and social capital level of the countries which have high income thresholds couldn?t be determined. In the result of this study, it is extrapolated that the countries which doesn?t have sufficient amount of physical capital can realize economic growth by increasing their institutional quality and social capital levels.