Social Networks Over the Lifecycle, and the Relationship between Human Capital and Social Capital

Abstract

While an extensive literature studies social capital outcomes, the evolution process of social capital remains largely ignored. This paper presents a dynamic model of lifetime decision making of the individual's social capital accumulation. Structural parameters of the model - estimated using the method of simulated moments - explain the observed lifetime variations of social capital stocks and flows. The findings also indicate multiple links between human capital and social capital working in opposite directions: people with more education have higher opportunity costs of time, which increase their costs of investment in social capital. But, at the same time, they also receive greater benefits from their social capital, and because their net benefits are higher we observe higher levels of social capital investment among people with higher education.