The monetary value of social capital
Johannes Orlowski and
Pamela Wicker
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2015, vol. 57, issue C, 26-36
Abstract:
The purpose of this study is to estimate the monetary value of social capital by considering its multidimensional nature. Four dimensions are conceptualized: Interpersonal trust, institutional trust, trustworthiness, and participation in civil society (formal and informal). The monetary value is obtained by including social capital in a well-being function and estimating the shadow price of social capital. The empirical analysis is based on data from the European Values Survey covering 45 European countries. A generalized ordered response model is estimated to account for possible heterogeneity of social capital indicators among the ten different subjective well-being levels. The results show that on average a one standard deviation increase in interpersonal trust (people's fairness) is worth an extra € 7913 per year in terms of foregone income, the same increase in institutional trust is worth € 7405, and the same increase in the importance of family is worth € 7312. The findings indicate that social capital has significant monetary value to individuals. This should be considered when designing government policies aiming at, e.g., labor market mobility that are accompanied by a decreasing social capital stock that, in turn, may negatively affect economic and political development.
Keywords: Happiness; Monetary value; Shadow price; Compensation valuation; Social capital; Subjective well-being; Trust; Generalized ordered probit model (search for similar items in EconPapers)
JEL-codes: A13 D60 I30 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:57:y:2015:i:c:p:26-36
DOI: 10.1016/j.socec.2015.04.007
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