Interacted and Dynamic Effects between Social Capital and Economic Development: the Case of Iran (1989-2006)

In this paper, a version of the Vector Auto Regression (VAR) model has been used to investigate the interacted and dynamic effects between social capital and economic development in Iran during the period 1987-2006. To this purpose, variables of human capital, health and income distribution have been considered as the proxies of economic development. In addition, the volume of risky bank cheques has been indicated for the lack of social capital in the country. The empirical results have shown that the higher levels of social capital the more improved development indicators, while the more improved economic development the more enhanced social relationships based on trust, that is, the higher social capital.