Abstract
Based on data on a cross section of individuals surveyed in the 1999–2002 wave of World and European Values Surveys, we investigate the multilateral associations between bridging social capital, individuals’ earnings, as well as social trust and employment status. Our analysis provides robust evidence that the relationship between bridging social capital and earnings is inverted-U shaped. We carry out a range of tests in order to ascertain that this result is not driven by regressor endogeneity or omitted variables bias. We also identify significant interaction effects between bridging social capital, social trust, and employment status.
Highlights
Social capital, defined on the basis of density and diversity of individuals’ social networks (Lin 2001), is often argued to be an important determinant of their economic and psychological well-being
Based on data on a cross section of individuals surveyed in the 1999–2002 wave of World and European Values Surveys, we investigate the multilateral associations between bridging social capital, individuals’ earnings, as well as social trust and employment status
Based on data on a cross section of individuals surveyed in the 1999–2002 wave of World and European Values Surveys, we identify the curvature and strength of relationship between bridging social capital and individuals’ earnings, controlling for respondents’ social trust, employment status, education, and a wide range of other social characteristics
Summary
Social capital, defined on the basis of density and diversity of individuals’ social networks (Lin 2001), is often argued to be an important determinant of their economic and psychological well-being. For several exceptions, it is usually argued that bridging social capital increases earnings whereas bonding social capital decreases them Our claim is that the literature has overlooked an important possibility of a nonlinear association between bridging social capital and individuals’ earnings. The methodological strength of our empirical analysis lies with the fact that in addition to looking for nonlinear effects, we identify the consequences of the potential presence of omitted variables and the endogeneity of social capital in earnings regressions. We conclude that omitting these variables and disregarding the endogeneity problem could have biased some of the earlier results, but it does not affect the main empirical finding of the current study: that the association between bridging social capital and individuals’ earnings has the inverted-U shape.
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