Social Capital and Reduction of Poverty Essay – Economic development is important for every country as it not only generates prosperity but also increases the size of economy and subsequently elevating the living standard of its citizens. Social capital is one of the tools which aid economies in their development and eradication of poverty. The study conducted is focused on analyzing the relationship of the constituents of social capital and poverty rate through the use of the fixed-effect model.

The analysis has shown some surprising results. For instance, the educational spending and health spending has been found to raise poverty rates. Such relationships can be explained through the phenomenon of brain drain or lack of equal opportunities. Further study in the highlighted areas is needed to investigate these contrasting relationships. Various aspects of social capital become more potent, social capital’s dividends. The more potent a social capital is (more externalities, it creates and easier it is to exploit it), more effective it is to eradicate poverty, which is the prime concern for nations