Social Capital

Social capital is the networks, norms, and trust that facilitate cooperation among individuals and groups. Social capital is a resource that enables collective action, and it is associated with a range of economic and social outcomes.

Concept

Social capital comprises the relationships among individuals and the norms that govern their behaviour. The networks provide information and access to resources, while the norms provide the basis for trust and for cooperation.

The concept has been developed by sociologists and by economists, and it has been applied to the analysis of a range of issues, including the functioning of communities, the performance of institutions, and the process of development.

Forms

Social capital takes several forms. Bonding social capital refers to the ties within a group, which provide support and solidarity. Bridging social capital refers to the ties between groups, which provide access to a wider range of resources.

Linking social capital refers to the ties between individuals and institutions, which provide access to power and to resources. The different forms have different effects, and the balance among them affects the outcomes.

Economic Effects

Social capital is associated with a range of economic effects. The trust that it generates reduces the costs of transactions, since the parties do not need to rely on formal contracts and on enforcement. The networks provide information that improves the functioning of markets.

Social capital is also associated with the provision of public goods and with the quality of institutions. Communities with high levels of social capital are better able to organise collective action and to hold institutions accountable.

The relationship between social capital and economic performance has been documented empirically, though the evidence is subject to issues of measurement and of causality.

Measurement and Policy

The measurement of social capital is difficult, since the concept is broad and the data are limited. The measures include the membership of associations, the level of trust, and the extent of social networks.

The policy implications concern the support for the institutions and the networks that generate social capital. The policies include the support for community organisations, for education, and for the institutions that foster trust.

The design of policy must take account of the fact that social capital can also have negative effects, since the networks can be used to exclude others and to promote interests that are contrary to the public interest.

The Social Capital and the Institutions

The social capital is related to the quality of the institutions, since the trust and the norms support the cooperation and the compliance.

The communities with the high social capital are better able to organise the collective action and to hold the institutions accountable. The social capital also supports the functioning of the markets, since the trust reduces the transaction costs.

The relationship between the social capital and the institutions is bidirectional, since the institutions also shape the social capital. The design of the institutions must consider their effect on the social capital.

The Measurement

The measurement of the social capital is difficult, since the concept is broad and the data are limited. The measures include the membership of the associations, the level of the trust, and the extent of the networks.

The surveys measure the trust by asking the respondents about their confidence in the others. The measures are subjective and are subject to the biases, but they provide the comparable data across the countries.

The measurement also includes the measures of the networks, including the membership of the associations and the participation in the community. The measures inform the analysis of the social capital and of its effects.

The Policy Implications

The policy implications of the social capital concern the support for the institutions and the networks that generate it.

The policies include the support for the community organisations, for the education, and for the institutions that foster the trust. The design of the policies must take account of the fact that the social capital can also have the negative effects, since the networks can be used to exclude the others.

The policy must also consider the effect of the other policies on the social capital. The design of the public policies affects the networks and the norms, and the effects should be considered in the design.

Summary

Social capital is the networks, the norms, and the trust that facilitate the cooperation, and it is associated with the range of the economic and social outcomes. The analysis of the concept, of the measurement, and of the policy implications informs the understanding of the role of the social capital.

See also

• Institutional Economics
• Development Economics
• Economic Development