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Akhavan Kharazian R, Hafezi B, Rajabi M, Sharifdoust M. (2025). The relationship between social capital, public health, and governance with wealth creation mechanisms in economies with a medium level of welfare. refahj. 25(96), : 3 doi:10.32598/refahj.25.96.4514.2
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Extended Abstract
Introduction
Wealth creation mechanisms constitute a fundamental focus of economic research and policy formulation across societies. As demonstrated by Shambaugh et al. (2018), these mechanisms fundamentally determine an economy’s capacity to generate sustainable prosperity through three core channels: (1) productivity growth, (2) competitive advantage, and (3) dynamic efficiency.
These elements generally shape an economy’s ability to create sustainable wealth and effectively utilize its workforce (Shambaugh et al, 2018).
Within contemporary economic discourse, social capital constitutes a fundamental pillar of sustainable development. The World Bank (2023) conceptualizes social capital as “the invisible wealth of nations”. It considers it to include the relationships, norms, and values governing interactions between individuals and groups in a society, which strengthen cooperation, mutual trust, and social cohesion (Elmi et al, 2006).
Alternatively, the concept of public health encompasses the scientific and artistic methods of sickness prevention, increasing life expectancy, and supporting human well-being. This is achieved through systematic and pre-arranged actions, coupled with the well-considered decisions of both individuals and the wider population (Bage, 2023). This field also fundamentally contributes to wealth creation by impacting the workforce and productivity (Salmani et al., 2015).
Thus, it can be understood that wealth creation in an economy is a complex and multifaceted phenomenon influenced by various factors. A deep understanding of these factors and the adoption of effective policies to strengthen them play a key role in enhancing the level of welfare and wealth of society. On the other hand, the role of non-economic factors such as social capital and public health in wealth creation mechanisms has received less attention. These two issues, namely the limitations of traditional indicators and the neglect of non-economic factors, justify the necessity of conducting this research. The present study examines the macroeconomic conditions and factors that underpin wealth creation and the improvement of the living standards of individuals in society. Therefore, this research analyzes the relationship between social capital, public health, and governance with wealth creation mechanisms for countries with a medium level of welfare. The relationship of the aforementioned set of variables is examined using the econometric method of panel data regression analysis for 2007-2023.
Method
The relationship between social capital, public health, and governance and wealth creation mechanisms is examined in this research, using data from 71 selected countries with an average level of prosperity spanning 2007-2023. The data used is extracted from the Legatum Institute’s dataset.
In line with Romer’s fundamental theory and following the article by Diebolt and Le Chapelain (2019), in the present study, relation (1) is used to achieve the research objectives:
relation (1)
WCMit = β₀ + β₁SOCit + β₂HEAit + β₃GOVit + β₄PERit + β₅EDU²it + εit
Where: WCMit defines the wealth generation capacity of the economy in country t in year i. β0 is the intercept, SOCit is the variable for social capital, HEAit is the variable for public health, GOVit is the variable for governance, PERit is the variable for personal freedom, EDU²it is the variable for education squared, and εit is the error term.
Findings
In the selected countries, the regression model demonstrated a significant positive influence of social capital, public health, and governance on wealth creation. However, personal freedom had a significant negative influence. Additionally, education’s impact on wealth creation was significant and non-linear.
Discussion
Based on the results of this research, policymakers should pay special attention to the indicators of social capital, including trust, cooperation, and collaboration among individuals and groups. These factors provide a suitable environment for innovation, entrepreneurship, and the exchange of ideas, leading to increased risk-taking, creativity, and ultimately economic prosperity. Additionally, public health, influenced by factors such as nutrition, hygiene, and access to healthcare services, directly impacts the ability and dynamism of the workforce. Healthy and vibrant individuals are more productive and have fewer absences from work, which significantly affects production and economic growth. Improving community health creates a positive cycle; increased health leads to economic growth, which allows for higher healthcare spending and further enhancement of health levels. Strong and efficient governance, creates appropriate legal and executive frameworks, thereby providing the necessary security and trust for the participation of individuals and institutions in economic activities, leading to investment attraction and improved economic conditions.
Another research finding is the impact of personal freedom and education on wealth creation. Contrary to popular belief, an unplanned and sudden increase in personal freedom can harm wealth creation. This negative impact arises from the complex interaction of personal freedom with other institutional-economic factors such as weak institutions, corruption, inequality, and economic transition challenges. In fact, under these conditions, an increase in freedom may lead to instability, an increase in illegal activities, and a decrease in investment. Therefore, to effectively utilize the benefits of freedom, appropriate institutional and economic groundwork is essential. The relationship between education and wealth creation, however, is non-linear. This finding indicates that an increase in education at higher levels has a greater impact on wealth creation than lower levels. This phenomenon is related to the concept of knowledge spillover; as the level of education in society increases, the capacity to absorb, disseminate, and produce knowledge and innovation also increases, ultimately leading to improved economic performance and increased wealth creation.
Bage, B. (2023). Public health system in promotion of water sanitation and hygiene: an analytical study. World Review of Science, Technology and Sustainable Development, 19(1-2), 70-82. https://doi.org/10.1504/WRSTSD.2023.127301
Elmi, Zahra (Mila). Sharepour, Mahmoud., Hosseini,Seyyed Amirhossein., (2006). Social Capital and how it affects the economy. Journal of Economic Research, 40(4) (In Persian). https://jte.ut.ac.ir/article_12458_0ada6ee23b24b983babdb8166ededc5d.pdf
enous technological change. Journal of political Economy, 98(5, Part 2), S71-S102. https://www.jstor.org/stable/2937632
Salmani, B., Panahi, H., & Mohammadi Khaneghahi, R. (2015). The impact of health on per capita income, an empirical analysis in middle income countries. Economic Growth and Development Research, 5(20), 108-199 (In Persian). https://dor.isc.ac/dor/20.1001.1.22285954.1394.5.20.6.0
Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P. (2018). The state of competition and dynamism: Facts about concentration, start-ups, and related policies. Hamilton Project. Washington, DC: Brookings Institution. https://www.brookings.edu/wp-content/uploads/2018/06/ES_THP_20180611_CompetitionFacts_20180611.pdf
Introduction
Wealth creation mechanisms constitute a fundamental focus of economic research and policy formulation across societies. As demonstrated by Shambaugh et al. (2018), these mechanisms fundamentally determine an economy’s capacity to generate sustainable prosperity through three core channels: (1) productivity growth, (2) competitive advantage, and (3) dynamic efficiency.
These elements generally shape an economy’s ability to create sustainable wealth and effectively utilize its workforce (Shambaugh et al, 2018).
Within contemporary economic discourse, social capital constitutes a fundamental pillar of sustainable development. The World Bank (2023) conceptualizes social capital as “the invisible wealth of nations”. It considers it to include the relationships, norms, and values governing interactions between individuals and groups in a society, which strengthen cooperation, mutual trust, and social cohesion (Elmi et al, 2006).
Alternatively, the concept of public health encompasses the scientific and artistic methods of sickness prevention, increasing life expectancy, and supporting human well-being. This is achieved through systematic and pre-arranged actions, coupled with the well-considered decisions of both individuals and the wider population (Bage, 2023). This field also fundamentally contributes to wealth creation by impacting the workforce and productivity (Salmani et al., 2015).
Thus, it can be understood that wealth creation in an economy is a complex and multifaceted phenomenon influenced by various factors. A deep understanding of these factors and the adoption of effective policies to strengthen them play a key role in enhancing the level of welfare and wealth of society. On the other hand, the role of non-economic factors such as social capital and public health in wealth creation mechanisms has received less attention. These two issues, namely the limitations of traditional indicators and the neglect of non-economic factors, justify the necessity of conducting this research. The present study examines the macroeconomic conditions and factors that underpin wealth creation and the improvement of the living standards of individuals in society. Therefore, this research analyzes the relationship between social capital, public health, and governance with wealth creation mechanisms for countries with a medium level of welfare. The relationship of the aforementioned set of variables is examined using the econometric method of panel data regression analysis for 2007-2023.
Method
The relationship between social capital, public health, and governance and wealth creation mechanisms is examined in this research, using data from 71 selected countries with an average level of prosperity spanning 2007-2023. The data used is extracted from the Legatum Institute’s dataset.
In line with Romer’s fundamental theory and following the article by Diebolt and Le Chapelain (2019), in the present study, relation (1) is used to achieve the research objectives:
relation (1)
WCMit = β₀ + β₁SOCit + β₂HEAit + β₃GOVit + β₄PERit + β₅EDU²it + εit
Where: WCMit defines the wealth generation capacity of the economy in country t in year i. β0 is the intercept, SOCit is the variable for social capital, HEAit is the variable for public health, GOVit is the variable for governance, PERit is the variable for personal freedom, EDU²it is the variable for education squared, and εit is the error term.
Findings
In the selected countries, the regression model demonstrated a significant positive influence of social capital, public health, and governance on wealth creation. However, personal freedom had a significant negative influence. Additionally, education’s impact on wealth creation was significant and non-linear.
Model estimation results, dependent variable of wealth creation mechanisms
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Discussion
Based on the results of this research, policymakers should pay special attention to the indicators of social capital, including trust, cooperation, and collaboration among individuals and groups. These factors provide a suitable environment for innovation, entrepreneurship, and the exchange of ideas, leading to increased risk-taking, creativity, and ultimately economic prosperity. Additionally, public health, influenced by factors such as nutrition, hygiene, and access to healthcare services, directly impacts the ability and dynamism of the workforce. Healthy and vibrant individuals are more productive and have fewer absences from work, which significantly affects production and economic growth. Improving community health creates a positive cycle; increased health leads to economic growth, which allows for higher healthcare spending and further enhancement of health levels. Strong and efficient governance, creates appropriate legal and executive frameworks, thereby providing the necessary security and trust for the participation of individuals and institutions in economic activities, leading to investment attraction and improved economic conditions.
Another research finding is the impact of personal freedom and education on wealth creation. Contrary to popular belief, an unplanned and sudden increase in personal freedom can harm wealth creation. This negative impact arises from the complex interaction of personal freedom with other institutional-economic factors such as weak institutions, corruption, inequality, and economic transition challenges. In fact, under these conditions, an increase in freedom may lead to instability, an increase in illegal activities, and a decrease in investment. Therefore, to effectively utilize the benefits of freedom, appropriate institutional and economic groundwork is essential. The relationship between education and wealth creation, however, is non-linear. This finding indicates that an increase in education at higher levels has a greater impact on wealth creation than lower levels. This phenomenon is related to the concept of knowledge spillover; as the level of education in society increases, the capacity to absorb, disseminate, and produce knowledge and innovation also increases, ultimately leading to improved economic performance and increased wealth creation.
Bage, B. (2023). Public health system in promotion of water sanitation and hygiene: an analytical study. World Review of Science, Technology and Sustainable Development, 19(1-2), 70-82. https://doi.org/10.1504/WRSTSD.2023.127301
Elmi, Zahra (Mila). Sharepour, Mahmoud., Hosseini,Seyyed Amirhossein., (2006). Social Capital and how it affects the economy. Journal of Economic Research, 40(4) (In Persian). https://jte.ut.ac.ir/article_12458_0ada6ee23b24b983babdb8166ededc5d.pdf
enous technological change. Journal of political Economy, 98(5, Part 2), S71-S102. https://www.jstor.org/stable/2937632
Salmani, B., Panahi, H., & Mohammadi Khaneghahi, R. (2015). The impact of health on per capita income, an empirical analysis in middle income countries. Economic Growth and Development Research, 5(20), 108-199 (In Persian). https://dor.isc.ac/dor/20.1001.1.22285954.1394.5.20.6.0
Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P. (2018). The state of competition and dynamism: Facts about concentration, start-ups, and related policies. Hamilton Project. Washington, DC: Brookings Institution. https://www.brookings.edu/wp-content/uploads/2018/06/ES_THP_20180611_CompetitionFacts_20180611.pdf
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Received: 2024/10/24 | Accepted: 2025/01/22 | Published: 2025/04/4
Received: 2024/10/24 | Accepted: 2025/01/22 | Published: 2025/04/4
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