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Measuring Social
Capital
Physical capital can be measured three ways:
1. In natural units, e.g. number of tractors
2. In dollars, at market value.
3. In dollars, by adding up investment and
subtracting off depreciation.
But social capital has no natural units, is not
traded separately in the market, and is not
acquired by cash investment.
Moreover, there are the spillovers to worry
about.
Using a Proxy
Output = S2*capital.3 *labor .7 *land2
S = social capital, unmeasureable
But suppose we know that
S = a*B
a=some number, unknown
B=number of bowling teams
Then:
Output = (aB)2*capital.3 *labor .7 *land2
Proxies for Social
Capital
1. How many associations people say
they belong to (Glaeser, Putnam).
2. How much people say they trust each
other (La Porta)
3. Aggregate data such as the number of
associations in a country or the
level of crime (Putnam).
4. Subjective evaluation by an expert
observer (Fukuyama, De
Tocqueville).
5. Experimental results (Reader’s
Surveys of Associations
The General Social Survey asked
1,500-3,000 Americans how many
different kinds of associations they
belonged to, 1975-present.
The World Values Survey asked
1,000 people in each of 40 countries a
similar question in 1981-4, 1990-3, and
1995-7.
Surveys of Trust
The World Values Survey asked:
``Generally speaking, would you
say that most people can be
trusted, or that you can't be too careful
in dealing with people?'’
(But Glaeser et al. (2000) found that Harvard students
who said they were trusting actually were not, though
they were trustworthy.)
Trust in Large
Organizations
Rafael La Porta, Florencio Lopez-deSilanes, Andrei Shleifer, and Robert
Vishny
American Economic Review, Papers and
Proceedings, 87: 333-338 (May 1997)
Independent Variables
• Trust in people: % of respondents
who said most people can be
trusted when asked: “Generally
speaking, would you say that most
people can be trusted or that you
can’t be too careful in dealing with
people?”
• Log of Gross Domestic Product
per capita: measured in dollars
• Hierarchical religion: % of the
population that is Roman Catholic,
Eastern Orthodox, or Muslim.
Government Variables to
Explain
• Efficiency of the judiciary: “efficiency
and integrity of the legal environment as it
affects business, particularly foreign firms”
• Corruption: low rating if “high
government officials are likely to demand
special payments and illegal payments are
generally expected throughout lower
levels of government…”
• Bureaucratic quality: “autonomy from
political pressure” and “strength and
expertise to govern without drastic changes
in policy or interruptions in government
services”
• Tax compliance: subjective assessment of
the level
Civic Participation
Variables
• Civic Participation: % of
seven civic activities in which
the respondent participated,
from social-welfare services,
education/art/cultural, local
community affairs,
conservation/environment,
youth work, and voluntary
health organizations
• Participation in professional
associations: % of respondents
who belonged to one
Social Efficiency
Variables
• Infrastructure quality: Subjective assessment of
the “facilities for and ease of communication
between headquarters and the operation, and within
the country” and of transportation
• Adequacy of infrastructure: Average of five
scores of the extent to which business needs are
met by roads, air, ports, telecommunications and
power supply.
• Log of the infant mortality rate: Deaths before
age one per thousand live births
• Completed high school: for the male population
aged 25 and over
• Adequacy of educational system: the extent to
which education “meets the needs of a competitive
economy”
• Log inflation: log of the geometric average annual
inflation using the implicit price deflator for GDP
• GDP growth: average annual growth in per capita
GDP
Family vs. Strangers
• When the ratio of the Top 20
firms’ sales to GDP is regressed
on Trust and on Trust in Family,
the coefficient on Trust is .65
(t=4.1) and the coefficient on
Trust in Family is -.56 (t=3.1).
• So is Trust in Family bad for big
companies?
New LaPorta
Regressions
R-squared = 0.69
---------------------------------------------------------Judicial Efficiency Coefficient t-statistic Conf.
------------------------------------------------- ------log GNP
.33
1.42
Hierarch.Religion
-.006
-0.75
Trust
7.07
2.75
1.2%
Trust in Family
-1.39
-0.74
Constant
8.01
1.07
R-squared = 0.50
------------------------------------------------------------Civic Participation Coefficient t-statistic Conf.
---------------------------------------------------------log GNP
.012
2.45
2.1%
Hierarch.Religion
-.0001
-0.89
Trust
.097
1.83
7.9%
Trust in Family
-.0035
-0.17
Constant
-.052
-0.59
Conclusions--Laporta
• The Trust variable is correlated
across countries with many
indicators of success.
• Membership in associations is
also correlated with success.
• Religion probably does not have
an effect on success besides its
effect on Trust, but it may have
a big effect on Trust.
Table 4: Memberships
Dependent Variable,
y
dy/dx
x= Education
dy/dx
x= Home
Ownership
Total number of
memberships (OLS)
0.2229
(0.0046)
0.3341
(0.0590)
Member of a
church group? (probit)
0.0260
(0.0013)
0.0562
(0.0153)
Member of a
school service group? (probit)
0.2229
(0.0046)
0.3341
(0.0590)
Includes controls for log(income), income missing,
black,female, year of birth, age category, married, number of
children, region, and log city population. The number of
observations is about 18,500 for the Education regressions and
5,700 for the Home regressions.
Conclusions--Glaeser
• People do tend to choose their
memberships in associations as
if they were investments.
• Middle-aged, rich, non-mobile
people, and especially,
educated ones, join the most
associations.
• Most of the variance in joining
is left unexplained, though.