Social Capital and Economic Performance in the …casey1/US Social Capital.pdfEconomic Performance...
Transcript of Social Capital and Economic Performance in the …casey1/US Social Capital.pdfEconomic Performance...
Social Capital and
Economic Performance in the American States
(Last Updated October 2002)
Terrence Casey Assistant Professor of Political Science Department of Humanities and Social Sciences Rose-Hulman Institute of Technology Terre Haute, IN 47802 (812) 877-8281 [email protected] Paper presented at the American Political Science Association conference, Boston MA, August 28-September 1, 2002.
ABSTRACT: Do areas with higher levels of social capital have stronger economies? Robert Putnam’s concept of social capital is said to provide widespread benefits, not the least of which are vibrant, productive economies. Putnam presents a logical, compelling case for the salutary effects of social capital, but what he does not present is any coherent data -- beyond anecdotal evidence -- to show that there is a consistent correlation, let alone a causal connection, between social capital and economic performance in the US. This paper will thus present an empirical analysis of social capital and economic performance for the American states. The 14-variable state-level social capital index presented by Putnam in Bowling Alone will be used to gauge variations in social capital across states. This is compared against state-level output data, measures of physical capital and measures of human capital. The results show a mild but statistically significant correlation between social capital and economic performance, but only when social capital is combined with other predictors of economic performance. Furthermore, social capital is shown to be a far less significant factor than more traditional economic indicators. In sum, although there may be an economic payoff to higher levels of social capital, it is relatively small and only accrues if other drivers of economic performance are already secure.
Introduction
Do areas with higher levels of social capital have stronger economies? Few concepts
have precipitated so much research as that of social capital, which is said to provide widespread
social benefits, not the least of which are vibrant, productive economies. Putnam presents a
logical, compelling case for the salutary effects of social capital, but what he does not present is
any coherent data -- beyond anecdotal evidence -- to show that there is a consistent correlation,
let alone a causal connection, between social capital and economic performance in the US. This
paper presents an empirical analysis of social capital and economic performance for the
American states. The 14-variable state-level social capital index presented by Putnam in Bowling
Alone will be used to gauge variations in social capital across states. Numerous economic output
indicators (i.e., per capita income, growth in gross state product, etc.) will be presented for the
last two decades and cumulated into an economic performance index. This analysis will show
that by itself social capital is a poor indicator of state-level economic performance. To further
clarify the relationship, measures of both physical and human capital are brought into the
equation. Regression analysis using these variables shows that while social capital is positively
related in a statistically significant fashion with economic performance, its relative importance
compared to other factors is slight. In sum, although there may be an economic payoff to higher
levels of social capital, it tends to accrue at the margins, and only after other factors that drive
economic performance are securely in place.
Social Capital as an Economic Asset
Social capital is defined as features of social organization, such as social networks and
norms of interaction, that enable people to act collectively (Putnam, 2000, p. 19; Woolcock and
Narayan, p. 226). The lineage of the concept goes back to the early 20th century, 1 but until a
decade ago it was only the rare sociologist that gave it any concern. All that changed in 1993
with the publication of Robert Putnam’s Making Democracy Work, in which he attributed the
superior governance of northern versus southern Italy to greater stocks of social capital.
Putnam extended this idea into the American context with his 1995 ‘bowling alone’ article
(Putnam, 1995), in which he attributed various social and political pathologies to a general
decline in social capital in the US since the 1950s, an argument more fully elaborated in a recent
book under the same title (Putnam, 2000).2 Putnam’s work captured the imagination of
researchers across a wide range of disciplines and policy areas. In the early 1990s perhaps a
dozen or so articles were published each year on social capital. Now the figure is closer to 200
(PIU, p. 9). The theory has been invoked to provide explanations for such wide-ranging topics
as education, health care, juvenile delinquency, crime rates, economic development, business
organization, and so on (Woolcock, 1998, pp. 193-96, fn 20). Social capital is virtually a
philosopher’s stone for understanding a plethora of social dynamics.
With the many and sundry applications of the concept, a complete review of the literature
would be difficult.3 More importantly it would be unnecessary because the concern here is only
with the connection between social capital and economic performance. How are networks and
norms translated into an economic asset? Everyone is familiar with the aphorism, “It’s not what
you know, it’s who you know.” Conceived of in this way, social capital (‘who you know’) is an
asset are possessed by individuals and used to advance their personal economic standing (i.e., 1 The commonly accepted well-spring for the idea of social capital is Lyda J. Hanifan, a superintendent of schools in West Virginia in the 1920s (Woolcock and Narayan, p. 228; Putnam, 2000, p. 19) 2 The somewhat odd title refers to the fact that, although Americans are bowling more than ever, the number of bowling leagues has declined. Hence we are ‘bowling alone’, a point indicative of American’s general trend toward social disconnectedness. 3 For general reviews and critiques of the social capital literature, see Baron, Field and Schuller, and Dasgupta and Serageldin.
using ‘connections’ to land a lucrative job). This idea is hardly controversial, but social capital
theorists take it one step further to suggest that the proliferation of networks and bonds of trusts –
that is, social capital proper -- are in fact traits possessed by communities, not just individuals.
Extensive social connections, feelings of generalized trust, and prevalent norms against
opportunism and malfeasance serve to enhance the efficient operation of markets by creating
positive externalities and/or by reducing transaction costs (PIU, p. 51-52, Whiteley, pp. 449-50).
Social capital is transformed from a private into a public good that provides collective and
cumulative economic benefits (Putnam, 2000, p. 21). “Those communities endowed with a rich
stock of social networks and civic associations will be in a stronger position to confront poverty
and vulnerability, resolve disputes, and/or take advantage of opportunities.” (Woolcock, 2001, p.
12) Areas well-endowed with ample stocks of social capital are likely to be more prosperous
communities and to stay that way (Putnam, 1993a).
Despite the explosion of theoretical articles on social capital and economics, the number
of empirical studies has been rather meager. Studies undertaken on national economies have
found significant correlations between elements of social capital, particularly trust, and
indicators of aggregate economic performance (Knack and Keefer, 1997; Whiteley, 2000).
Whiteley, indeed, argues that, if other factors are controlled, social capital is as least as important
as human capital in explaining national growth. Analyses at the sub-national level have been
rarer still and have provided mixed results. Working with John F. Helliwell, Putnam has found
that social capital explains economic as well as political difference in Italy (Helliwell and
Putnam, 1995). In contrast, Schneider, Plummer and Bauman’s (2000) study showed that
economic rather than social factors were the driving forces of economic growth in the (sub-
national) regions of Europe. Finally, Casey (2002) showed that while there were positive
correlations between trust, civic associations and economic performance across the regions of
Great Britain, economic associations (i.e., labor unions) were negatively correlated with
economic growth. Unfortunately, no one has yet to undertake a proper empirical examination of
the connection between state economic performance and social capital in the US. Of course,
Putnam maintains the connection in Bowling Alone, with a map detailing the differences in social
capital across states (p. 293, reproduced here in Figure1) and a whole chapter discussing social
capital produces stronger economies (Chapter 19). What he does not do, however, is to provide
empirical data to support this causal connection.4 Thus this hypothesis has never been properly
tested in the American context. This is the focus of the remainder of this paper.
Social Capital and Economic Performance in the US
Do states with higher levels of social capital also have stronger economies? Putnam
specifically states: “At the local or regional level, there is mounting evidence that social capital
among economic actors can produce aggregate economic growth” (2000, p. 323). In Bowling
Alone, he constructed a 14-variable index of social capital at the state level (pp. 291-3).
Collectively these are intended to measure the core traits and behaviors underlying the concept of
social capital: community organizational life, engagement in public affairs, community
volunteerism, informal sociability, and social trust. The distribution of these traits across the
states, according to Putnam, is analogous to barometric pressure systems, with a social capital
“high pressure system” centered over Minnesota, a “low pressure system” centered over
Mississippi, and various gradations in between. By the logic of his argument, we should thus find
a pattern of state economic outcomes similar to that found for social capital.
In order to test this proposition, state-level data on economic performance was gathered
and compared against Putnam’s social capital index.5 Six measures were examined for each state
from 1980 through the present for the 48 contiguous US states.6 Alaska and Hawaii are excluded
from this analysis not because of a lack of economic data, but because Putnam does not provide a
comprehensive social capital score for these states due to shortcomings in the available survey
data. The first three economic measures cover basic output: per capita income (in constant
dollars), the annual percentage change in per capita income, and the annual percentage change in
4 As one review of Bowling Alone put it, “Putnam is making a case rather than testing a hypothesis…” (Edwards and Foley, 2001, p. 227). 5 The question in this paper is not the accuracy of Putnam’s state-by-state index, but whether there is an empirical connection between variations in social capital and variations in economic performance. Therefore I have simply adopted his index scores for each state. This data was downloaded from the publicly available website that accompanied Bowling Alone. See http://www.bowlingalone.com/data.php3. 6 The logic for this particular timeframe is twofold. First, performance had to be gauged over a relatively long period of time in order to account for business cycle effects. Secondly, although there are variations in the number of years covered by individual indicators in Putnam’s data, much of his polling data goes back to the late 1970s. Beginning the analysis in 1980 thus offers a reasonable comparability in years across dependent and independent variables. Alaska and Hawaii are excluded from this analysis due to the fact that Putnam does not provide a comprehensive social capital score for these states due to shortcomings in the available data.
gross state product (constant dollars).7 The fourth and fifth variables deal with jobs, specifically
the percentage growth in employment and the unemployment rate.8 Finally, more productive
states are likely to be more prosperous states, thus productivity is a key indicator. Unfortunately,
there is no comprehensive figure for productivity published at the state level. In order to get
some indication of cross-state differences in productivity, the value-added per production worker
in manufacturing was calculated for each state.9 Since the nominal values of all of these variables
are quite divergent, each was converted into an index value whereby the US average in each year
equaled 100 and each state was scaled accordingly. The scales were also constructed so that the
economically more beneficial result received a higher nominal value. Thus states with lower
unemployment rates thus have a higher index value on unemployment, and so on. These were
then averaged across the years to present a single index number for each state on each indicator,
which were then combined together to produce a state ‘Economic Performance Index’. All of
this was then compared against the state scores on Putnam’s ‘Social Capital Index’.
The full results by state are presented in Appendix Table A1, but the pertinent question is
whether greater stocks of social capital lead to stronger economies. At least in terms of simple
correlations, the answer is not really. Table 1 shows that on most measures of economic
performance, correlations with the overall social capital index range from very modest positive
values (r = 0.104 for per capita income) to very modest negative values (r = -0.128 for
employment growth), indicating essentially no connection between the variables. A similar
picture emerges when we look at the individual indicators of social capital rather than the
cumulative index. Rather than include all 14 of Putnam’s measures (many of which are
overlapping or redundant),10 Table 1 includes the variable from each of his five underlying traits
of social capital that had the highest correlation with his overall index (See Putnam, 2000, p. 291,
Table 4). The pattern largely remains one of a range of very small positive and negative
7 This data was gathered from the Bureau of Economic Analysis website (www.bea.gov). Employment growth was calculated as the year-to-year percentage increase in total non-farm employment. 8 This data was gathered from the Bureau of Labor Statistics website (www.bls.gov). 9 This was calculated as value-added in manufacturing divided by the number of production workers in each state. This was based on data from the Economic Census, which is conducted every five years on the ‘2’s’ and ‘7’s’. For this study this meant data for 1982, 1987, 1992, and 1997. Data from the Annual Survey of Manufactures was included for 2000.See Census Bureau, Annual Survey of Manufacturers: Geographic Area Statistics (Washington: Bureau of the Census) 1994 and 2000. 10 He includes, for example, both the percentage of people who served on the committee of a local organization and the percentage that served as an officer in a club or organization. This would seem to tap the same underlying values and behaviors.
correlations. There are two exceptions, however. State employment growth is negatively
correlated, albeit modestly, with all aspects of social capital other than community organization.
Of greater note is unemployment, which shows both a consistently positive and moderately
strong relationship to social capital.11 When we compare the cumulative indices together, we
again find a mix of low positive (on community organizational life and social trust) and low
negative (on engagement in public affairs, volunteerism, and informal sociability) and economic
performance. Thus it should hardly be a surprise that the correlation between the two indices is a
positive but insignificant r= 0.050. (A matrix of correlations between all variables included in
this study is included as Appendix Table A3.)
In order to test the relative significance of these correlations, linear regressions were run
with each of the individual economic indicators as well as the cumulative economic index
against the social capital index. Social capital appears to have a positive effect on per capita
income and productivity, but the connection is statistically insignificant. The effect of social
capital on growth state product and employment growth are also statistically insignificant,
although here the coefficients signs are reversed. Given this the results for the overall economic
index are slightly positive but insignificant. On the other hand, the positive correlation between
higher social capital and lower unemployment is not spurious (p < 0.001).
Drawing all of this together, there is no discernable overall connection between levels of
social capital and variations in economic performance across the American states. This can be
seen graphically in Figures 1 and 2, which map respectively the variations in social capital --
showing the “high and low pressure systems” that Putnam described – and economic
performance across the states. If Putnam’s thesis were correct, then the two maps should look
largely similar. In reality, the “high pressure systems” for economic performance are found in the
southeast and southwest – a result which is hardly surprising to anyone even casually familiar
with the American economy over the last few decades. Figure 3, additionally, is a scatter plot of
each state’s social capital index and economic performance index score. The top two and bottom
two states on each index are marked. What jumps out immediately from this graphic is that
Nevada has both the highest economic performance score and the lowest social capital score. All
11 It should be noted that the correlations here are between index values, and the unemployment index was constructed such that areas with lower unemployment received higher scores. Thus these figures should be read as higher social capital correlating with lower unemployment.
told, at least when taken in isolation, social capital serves rather poorly as an indicator of
economic performance.
Social Capital and Other Capitals
Of course, the retort of its advocates is that social capital cannot be examined in isolation.
Social capital is simply one form of capital among many others – physical capital, natural
capital, human capital, cultural capital, and financial capital (PIU, p. 13). Stocks of these ‘other
capitals’ obviously have a major influence on any given area’s potential for prosperity. Putnam
and others are certainly not maintaining that social capital is a sufficiently powerful influence on
economic outcomes that it can counter shortcomings in these other factors. All else being equal.
“…most researchers agree that social capital does help individuals to prosper. The only real
debate is over how big a role social capital plays relative to human or financial capital” (Putnam,
2000, p. 322). It is thus necessary to bring these other forms of capital into the equation so as to
decipher just how big a role social capital plays.
The first additional factor to consider is physical and financial capital. While these two
concepts are not exactly the same in terms of economic inputs, at least in the context of an
advanced industrial economy like the United States we tend to conceive of financial capital as a
fungible asset whose importance is that it can be transformed into productive physical capital. As
such we should see covariance between the two across states and can treat them as essentially the
same. The measure to be used here are net real stocks of private and public capital. State-level
data on this were gathered by Christ and Green (2002) in their study of public capital and small
firm performance. They examined private capital expenditure in real constant dollars in the
manufacturing sector in each state per year, included a depreciation term, and tracked the
changes in stocks over time.12 The same method was used on state government capital
expenditures as a measure of capital. Their study covered the period of 1967-97 for private
capital and 1970-96 for public capital. Since some of this data precedes the period covered in the
Putnam index, this study will only be using that data from 1980-96/97. Obviously, in pure dollar
figures we would expect a large state like California to have a much higher stock of both private
and public capital than a small state like Rhode Island. With the aim of equalizing data across
12 Data for this was drawn from the Annual Survey of Manufacturers.
states, stocks of public and private capital were calculated on a per capital basis. As with the
economic output measures, the capital figures – and, it should be noted, all of the other variable
discussed below -- were then recalculated as an index with the US average equaling 100.
Human capital also drives economic performance. Human capital is a catch-all term that
relates to any sort of skills, abilities, and knowledge possessed by individuals or more prevalent
in a particular community that can be translated into productive activity. The most basic measure
of the skills of the workforce is education, which is gauged here by the percentage of a state’s
population with a bachelor’s degree or higher.13 In addition to education, it has been recognized
since the days of Joseph Schumpeter that economic success requires entrepreneurial risk. Given
this, perhaps the most pertinent attribute of human capital that we would expect to find in more
prosperous areas is a high level of entrepreneurialism. Unfortunately, there is no direct measure
of entrepreneurialism. As a result, it is necessary to on a proxy measure. This was constructed
using state data on new business starts – the outcome of entrepreneurial endeavor – for 1994-98
from the Statistical Abstract of the United States. Given difference in size, a direct state-to-state
comparison would not be valid. Each state’s new business starts were thus calculated as a
percentage of all new business starts in the US. This was then compared against each state
economy’s contribution to the gross national product. It would be expected that a state that
constitutes 5% of the US national economy should produce roughly 5% of all new business starts
in a given year, thus producing a ratio at or near one. To the extent that the ratio is greater than
unity, we can reasonably infer that that the population of that state has above average tendencies
toward entrepreneurialism. To the extent that it is less than one, we can infer that entrepreneurial
traits are somewhat lacking in that state.
In addition to physical and human capital, states differ in their competitive endowment.
Initial structural conditions alter the economic challenge faced by a state, so these need to be
taken into account in assessing the relative importance of various forms of capital. Such
structural differences will be assessed first by the percentage of workers in labor unions. It is
inferred that states with a higher percentage of workers in unions will have less flexible labor
markets, which will a serve as a drag on the growth of the state’s economy. Secondly, the
industrial structure of a state is measured by the percentage of gross state product produced by
13 This data were gathered from various years of The Statistical Abstract of the United States and the Census Bureau website (www.census.gov).
manufacturing. Given the long-term trend of deindustrialization in the US and the rapid growth
of service industries, it is again inferred that states with a higher percentage of manufacturing are
likely to achieve lesser economic performance. As with the other measures discussed above, both
unionization and industrial structure were converted into index values. However, given the
inferred negative impact of these factors, the index values are the reverse of the nominal values
so that a higher index value accords with the more economically beneficial outcome (i.e., states
with more union members or manufacturing get lower scores and vice versa).
The correlations between the indicators of physical capital, human capital, and industrial
structure are presented in Table 3. Looking down the columns per capita income is boosted by
the amount of public capital (r = 0.365), education (r = 0.754) and the prevalence of labor unions
(r = -0.555 – given the reverse index the negative correlation means that higher levels of
unionization correlate with higher per capita income). Change in per capita income, on the other
hand, is negatively related to all but education. The growth in gross state product is most strongly
connected to the prevalence of business starts (r = 0.488), as is employment growth (r = 0.562).
At the same time, although higher levels of unionization appear to boost per capita income, they
serve to dampen employment growth (r = 0.368). Higher levels of education are positively
correlated to lower unemployment, while greater unionization produces higher unemployment on
average. Productivity, finally, is influenced the most by education and only slightly by public
capital. When compared to the cumulative economic index, only the private capital stock, rather
inexplicably, is negative. The others are all positive, with business starts showing the strongest
association (r = 0.481) and (lower) unionization the weakest (r = 0.162). At first blush, then,
other forms of capital appear to provide more certain predictors of economic performance than
social capital.
But how significant are these correlations? Multiple regression analysis of all of these
factors combined with social capital on the cumulative state economic index was conducted (see
Table 4). The first point to note is that the coefficient for social capital was both positive and
statistically significant at the p < 0.05 level. Private capital, public capital, business starts, and
unionization were also all significant at the p < 0.001 level. The coefficient for stocks of private
capital, despite being statistically significant, has a negative sign in contradiction to the inferred
theoretical relationship with economic performance, the results perversely implying that greater
investment serves to reduce growth. Industrial structure (percentage of manufacturing), in
contrast was not significantly related to overall economic performance nor, surprisingly, was
educational attainment. The overall fit of the model fit was positive and moderately strong, with
an R2 of 0.622 and an adjusted R2 of 0.555. The inference to be drawn from these results is that,
all else being equal, higher levels of social capital do translate into higher levels of performance.
However, when looking across the contiguous United States, all else is not equal. The relative
size of the coefficients for public capital, business starts, and unionization imply that changes in
these factors are much more important in improving overall economic outcomes. It takes a much
greater change in social capital to translate into improved economic performance. Social capital
is economically beneficial, but more at the margins and only if more traditional economic factors
are also favorable.
Conclusions
The analysis above only provides only a ‘first-cut’ at the question of the empirical
connection between social capital and economic performance in the US, so one should be
cautious in inferring too much from the results. Nevertheless, a few conclusions can be drawn
with some reasonable certainty. First, by itself social capital is not a good predictor of state-level
economic performance in the United States. Whether looking at Putnam’s cumulative index or at
its individual components, there is either no relationship or a very small positive correlation
between economic performance and social capital in the American states. This contradicts
previous cross-sectional studies of social capital and economics, which have found positive
relationships between components of social capital (i.e., trust) if not cumulative indices of the
concept (Knack and Keefer, 1997; Whiteley, 2000). That being said, higher levels of social
capital were shown to be positively and significantly related to lower unemployment. However,
the key question – as posed by Putnam himself – is the relative significance of social capital
compared to other forms of productive capital. Once other economic factors were brought into
the equation, the results of this study show that social capital matters, but not very much. Higher
levels of social capital do have an economic payoff, but only modestly and only if other basic
economic factors are securely in place. Inequalities in these factors are more probable
explanations of differences in state economic performance than are differences in endowments of
social capital. Although further testing is needed to clarify the point, it appears that Putnam’s
argument that higher levels of social capital in a community translates into aggregate economic
growth is not correct. One intriguing puzzle left unanswered by this study is why social capital is
so closely related to lower levels of unemployment when is it seemingly unrelated to other
economic indicators, including employment growth. Unfortunately, the data presented above is
insufficient to tease out this conundrum. However, this study has gone some way to offering a
more concrete understanding of the relationship between social capital and prosperity.
BIBILIOGRAPHY
Baron, Stephen, Field, John and Schuller, Tom. Eds. (2000) Social Capital: Critical Perspectives. Oxford, UK: Oxford University Press. Casey, Terrence, “Social Capital and Regional Economies in Britain,” under review at Political Studies. Christ, Kevin and Green, Richard (2002) “Public Capital and Small Firm Performance,” Unpublished Working Paper. Census Bureau (Various). Statistical Abstract of the United States. Washington: GPO. Census Bureau, (2000) Annual Survey of Manufacturers: Geographic Area Statistics. Washington: Bureau of the Census. Coleman, James (1990) Foundations of Social Theory. Cambridge, MA: Harvard University Press. Dasgupta, Partha and Serageldin, Ismail, eds. (2000) Social Capital: A Multifacted Perspective. Washington: World Bank. Edwards, Bob and Foley, Michael (1998), ‘Civil Society and Social Capital Beyond Putnam,’ American Behavioral Scientist, Vol. 42, No. 1, pp. 124-139. Edwards, Bob and Foley, Michael (2001) ‘Much Ado about Social Capital,’ Contemporary Sociology, Volume 30, No. 1, pp. 227-230. Fukuyama, Francis (1995) Trust: The Social Virtues and the Creation of Prosperity. New York: Free Press. Helliwell, John F. and Putnam, Robert D. (1995), ‘Economic Growth and Social Capital in Italy.’ Eastern Economic Journal, Vol 21, No 3, pp. 295-307. Knack, Stephen and Keefer, Philip (1997), “Does Social Capital Have an Economic Payoff? A Cross-Country Investigation’, Quarterly Journal of Economics, Vol.112, No. 4, pp. 1251-1288. Performance and Innovation Unit (PIU), “Social Capital: A Discussion Paper,” The Cabinet Office, London, April 2002. Portes, Alejandro (1998), ‘Social Capital: Its Origins and Application to Modern Sociology’, Annual Review of Sociology, Vol. 24, pp. 12-37. Putnam, Robert (1993) Making Democracy Work: Civic Traditions in Modern Italy. Princeton, NJ: Princeton University Press.
Putnam, Robert (1993a), ‘The Prosperous Community: Social Capital and Public Life,’ The American Prospect, Vol. 4, Issue 13. Putnam, Robert (1995), ‘Bowling Alone: America’s Declining Social Capital,’ Journal of Democracy, Vol. 6, No. 1, pp. 65-78. Putnam, Robert (2000) Bowling Alone: The Collapse and Revival of America’s Civic Community. New York: Simon and Schuster. Putnam, Robert (2001), ‘Social Capital: Measurement and Consequences,’ Canadian Journal of Policy Research, Vol. 2, No. 1, pp. 41-51. Schneider, Gerald, Plumper, Thomas, and Bauman, Stephan (2000), ‘Bringing Putnam to the European Regions: On the Relevance of Social Capital for Economic Growth’, Paper presented at the International Studies Association Conference, Los Angeles, CA. Skocpol, Theda and Fiorina, Morris (eds.) (2000) Civic Engagement in American Democracy. Washington, DC: Brookings. Whiteley, Paul F. (2000) ‘Economic Growth and Social Capital,’ Political Studies, Vol. 48, pp. 433-66. Woolcock, Michael (1998), ‘Social Capital and Economic Development: Toward and Theoretical Synthesis and Policy Framework’, Theory and Society, Vol. 27, No. 2, pp. 151-203. Woolcock, Michael (2001), ‘The Place of Social Capital in Understanding Social and Economic Outcomes,’ Canadian Journal of Policy Research, Vol. 2, No. 1, pp. 11-17. Woolcock, Michael and Narayan, Deepa (2000), ‘Social Capital: Implications for Development Theory, Research and Policy,’ World Bank Research Observer, Vol. 15, No 2, pp. 225-249.
Figures and Tables:
Figure 1: Putnam’s Social Capital Index by State Source: Putnam, Bowling Alone.
AL & HI = na
Index (from Putnam)
1.09 to 1.71 (6)0.46 to 1.09 (8)
-0.17 to 0.46 (12)-0.8 to -0.17 (13)-1.43 to -0.8 (9)
Figure 2: Economic Performance Index by State
AL & HI = na
Index(US Avg=100)
127.1 to 141.6 (2)112.4 to 127.1 (6)97.7 to 112.4 (21)83 to 97.7 (14)68.3 to 83 (5)
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Statistical Abstract of the United States.
Figure 3: Social Capital and Economic Performance
MS
SDND
LA
AZ
WVNV
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0
Economic Performance Indexr = 0.050
Top/Bottom two states on both indices labelled
Soci
al C
apita
l Ind
ex
Table 1: Correlations between Elements of Social Capital and Economic Performance
Per Capita Income
Change in Per Capita Income
Gross State
ProductEmployment
Growth Unemploy-
ment Productivity
ECONOMIC PERFORMANCE
INDEX Community Organizational Life
0.098 -0.126 0.222 0.243 0.562 0.048 0.351
Engagement in Public Affairs
0.042 -0.038 -0.148 -0.234 0.359 -0.038 -0.110
Community Volunteerism
0.065 -0.134 -0.173 -0.223 0.385 -0.087 -0.124
Informal Sociability
-0.189 0.044 -0.261 -0.224 0.398 -0.080 -0.178
Social Trust 0.288 -0.144 0.085 -0.035 0.547 0.174 0.204
SOCIAL CAPITAL INDEX
0.104 0.006 -0.079 -0.128 0.582 0.034 0.050
Table 2: Regression Results for Social Capital against Economic Performance Indicators Coefficient t-statistic Probability R2
Per Capita Income 1.830 0.763 0.449 0.010 Change in Per Capital Income 0.061 0.038 0.969 0.000 Gross State Product -0.748 -0.801 0.427 0.006 Employment Growth -3.353 -0.481 0.633 0.016 Unemployment Rate 13.674 4.594 0.000 0.338 Productivity 0.769 0.229 0.819 0.001 ECONOMIC PERFORMANCE INDEX 0.912 0.289 0.774 0.002
Table 3: Correlations between 'Other Capitals' and Economic Performance
Per Capita Income
Change in Per Capita Income
Gross State
ProductEmployment
Growth Unemploy-
ment Productivity
ECONOMIC PERFORMANCE
INDEX
Private Capital -0.261 -0.490 -0.287 -0.228 0.039 0.044 -0.305
Public Capital 0.365 -0.231 0.286 0.223 0.155 0.141 0.329
Education 0.754 0.400 0.077 -0.073 0.429 0.335 0.313 Business Starts 0.178 -0.010 0.488 0.562 -0.107 0.059 0.481
Unions* -0.555 -0.029 0.113 0.368 0.220 -0.159 0.162 GSP in Manufacturing*
0.099 -0.310 0.105 0.252 0.107 0.191 0.224
* Reverse index so that economically beneficial results index higher (i.e, higher index equals lower percentage in unions and lower percentage in manufacturing).
Table 4: Multiple Regression Results for Economic Performance Index Variable Coefficient t-Statistic Probability
Constant 37.72650 3.59757 0.00090 Social Capital 5.12119 2.23156 0.03130 Private Capital (per capita) -0.18112 -4.15437 0.00020 Public Capital (per capita) 0.39296 4.22555 0.00010 Education 0.03649 0.34369 0.73290 Business Starts 0.20830 2.55561 0.01450 Unions 0.17401 3.94801 0.00030 Industry (% manufacturing) -0.01305 -0.20090 0.84180 R2 0.62208 Adjusted R2 0.55594 F-statistic 9.40601 Prob(F-statistic) 0.00000 n= 48
Table A1: State Economic Performance and Correlation with Social Capital Index
State
Per Capita Income
Change in Per Capita Income
Gross State
Product Employment
Growth Unemployment
Rate Productivity
(Manufacturing)
ECONOMIC PERFORMANCE
INDEX*
SOCIAL CAPITAL INDEX**
AL 80.5 102.7 85.8 91.3 76.7 70.8 84.6 -1.07AZ 89.2
90.1 164.1 214.8 100.1 123.2 130.3 0.06AR 76 100 97.6 117.5 84.7 70.5 91.1 -0.5CA 110.7 92.4 116.7 106 83.1 113.1 103.7 -0.18CO 118.9 103.3 147.3 153.6 112 117.5 125.4 0.41CT 132.9 110.9 90.3 44.3 116.4 111.2 101.0 0.27DE 108.1 99 103.6 127.3 113.6 122.4 112.3 -0.01FL 99.1 95.5 119.2 186.9 100.7 92.8 115.7 -0.47GA 90.6 111.2 138.8 160.7 106.6 84.6 115.4 -1.15ID 81.2 94 179.9 145.4 91.2 85.3 112.8 0.07IL 107.5 99.4 95.3 56.8 86.3 105.4 91.8 -0.22IN 91.2 98.4 109.9 85.8 100.5 94.8 96.8 -0.08IA 91 94.2 97.9 74.3 118.2 112.7 98.1 0.98KS 95.8 94.4 80.2 95.6 119.8 102.7 98.1 0.38KY 80.6 100.8 103.2 107.7 84 106.2 97.1 -0.79LA 81.5 90.3 42.7 54.1 65 140.3 79.0 -0.99ME 87.1 103.7 69.5 100 102.4 70.1 88.8 0.53MD 114.9 118 85.9 97.3 110.7 108.8 105.9 -0.26MA 117.2 118 96.5 61.2 113.9 107.8 102.4 0.22MI 99.3 97.1 77.8 76.5 73.9 100.9 87.6 0MN 103.5 106 112 109.3 118.9 105.7 109.2 1.32MS 69.9 101.7 91.5 83.1 70.3 65.8 80.4 -1.17MO 93.1 100 77.3 86.3 102.1 105.8 94.1 0.1MT 81.8 84.9 70.2 88.5 91.8 77.7 82.5 1.29
Table A1 (cont.)
State
Per Capita Income
Change in Per Capita
Income Gross State
Product Employment
Growth Unemployment
Rate Productivity
(Manufacturing)
ECONOMIC PERFORMANCE
INDEX*
SOCIAL CAPITAL INDEX**
NE 93.5 102.3 98.4 97.8 136 93.2 103.5 1.15NV 106
86.6 212.2 260.1 97.8 86.8 141.6 -1.43NH 106.5 112.8 129.8 130.6 124.8 99.1 117.3 0.77NJ 123 107.6 97.6 72.7 101.5 116.4 103.1 -0.4NM 78.8 90.5 127.1 128.4 79.2 148 108.7 -0.35NY 116 106.8 85.6 48.1 92.3 110.4 93.2 -0.36NC 88.2 110.7 126.1 131.1 114 81.1 108.5 -0.82ND 83.8 101.7 77.4 78.1 124.8 90.5 92.7 1.71OH 96.7 95.9 88.3 64.5 90 104.8 90.0 -0.18OK 85.9 84.7 60 75.4 106 99.1 85.2 -0.16OR 94.2 94.2 174.3 113.1 83.8 91.1 108.5 0.57PA 100.2 100.4 84.6 48.1 92.2 91.3 86.1 -0.19RI 100.4 102.7 88.7 49.7 99.3 69.1 85.0 -0.06SC 80.5 105.6 117.1 115.3 102.1 73.9 99.1 -0.88SD 83.8 108.1 108 123.5 131.8 83.4 106.4 1.69TN 86.6 106.8 106.7 116.4 94.3 79.3 98.4 -0.96TX 93.2 96.1 124 129 92.9 120.4 109.3 -0.55UT 79.5 95.9 152.4 179.2 114.9 91.8 119.0 0.5VT 90.1 105.6 110.6 106.6 119.3 93.8 104.3 1.42VA 104.1 105 99.9 130.6 120.6 97.6 109.6 -0.32WA 103.2 99 138.2 137.2 82.7 106.3 111.1 0.65WV 75.8 92.2 64.9 35 43.7 98.2 68.3 -0.83WI 95.3 95.9 105.5 100 109.1 94.6 100.1 0.59WY 95.4 79.3 67.5 43.7 102.5 100.6 81.5 0.67
Correlation with Social Capital
0.104 0.006 -0.079 -0.158 0.582 0.034 0.050 1.000
* Average of individual economic indicators ** Data derived from Robert Putnam, Bowling Alone
Table A2: Social and 'Other Capitals' in Economic Performance
State Private Capital
Public Capital
Educational Attainment
New Business
Starts UnionizationIndustrial Structure
ECONOMIC PERFORMANCE
INDEX*
SOCIAL CAPITAL INDEX**
AL 98.3 89.2 74.3 111.1 120.5 76.1 84.6 -1.07AZ 71.5
118.3 93.6 127.5 150.3 123.3 130.3 0.06AR 92.7 68.2 65 96.3 149.6 68.2 91.1 -0.5CA 71.6 101.8 111.7 110 84.3 116.9 103.7 -0.18CO 82.7 123.3 135.7 124.9 133 133 125.4 0.41CT 74.1 112 130 84.2 77.6 86.2 101.0 0.27DE 107.7 115.5 100.1 87.3 106.7 65.9 112.3 -0.01FL 66.3 111.8 90.5 161.8 150.4 149.7 115.7 -0.47GA 82.3 100.6 93.4 116.4 147.8 95.1 115.4 -1.15ID 97.4 95.2 85.6 119.3 139.8 100.7 112.8 0.07IL 88.8 97.9 104.1 82.5 68.1 93.1 91.8 -0.22IN 101.6 83.5 69.2 83.1 86.6 29.2 96.8 -0.08IA 112.9 105.5 86.2 69.3 107.9 67.2 98.1 0.98KS 128.8 100.3 109.2 80 134.4 101.1 98.1 0.38KY 98.1 83.7 75.4 81.7 111.5 53.5 97.1 -0.79LA 142.7 76.8 80.6 78.7 144.7 117 79.0 -0.99ME 76.9 81.8 89.1 104.8 99 93.2 88.8 0.53MD 65.9 89.9 126.1 107.3 98.4 144.4 105.9 -0.26MA 68.5 100.8 133.5 90.9 89.7 96.4 102.4 0.22MI 82.3 76.7 86.4 87.8 41.8 37.8 87.6 0MN 94.9 120.1 113.9 73.8 66.1 86.8 109.2 1.32MS 83.4 88.2 76.7 94.6 156.9 72.7 80.4 -1.17MO 85.5 83.5 94.8 80.8 97.8 83 94.1 0.1MT 150.5 101.2 98 110.6 96.7 158.2 82.5 1.29
Table A2 (cont.)
State Private Capital
Public Capital
Educational Attainment
New Business Starts Unionization
Industrial Structure
ECONOMIC PERFORMANCE
INDEX*
SOCIAL CAPITAL INDEX**
NE 124.1 121.9 93.1 59.5 134.3 121.8 103.5 1.15 NV 106.4
159.6 79.4 130.6 70.5 176 141.6 -1.43NH 70.8 62 114.8 108.3 126.8 70.6 117.3 0.77NJ 71.9 101.1 121.5 145.8 51.3 103.7 103.1 -0.4NM 108.6 93.7 97 100.4 138.1 140.9 108.7 -0.35NY 72.4 135.1 109.8 107.7 19.3 124.4 93.2 -0.36NC 80.3 93.6 88.9 93.8 170.3 41 108.5 -0.82ND 229.4 109 91.2 69.4 137.2 164 92.7 1.71OH 81.5 91.4 89.3 81.4 69.3 44.1 90.0 -0.18OK 110.6 78.7 87.5 94.2 139.2 111.6 85.2 -0.16OR 86.3 96.3 103.8 101.2 78.9 82.7 108.5 0.57PA 78.4 91.7 136.7 93.5 74.4 81.4 86.1 -0.19RI 52.9 93.2 105.3 98 72.4 89.8 85.0 -0.06SC 87.2 95.9 79.7 99 173 57 99.1 -0.88SD 129.8 101.7 87.9 70.8 149.7 138.9 106.4 1.69TN 89.2 102.4 74.6 94.8 135.3 68.8 98.4 -0.96TX 111.2 90.3 96.2 98.2 155.8 118.9 109.3 -0.55UT 77.8 82.9 107.3 123.6 141.6 121.9 119.0 0.5VT 86.7 69.3 116.7 94.8 132.6 86 104.3 1.42VA 74.4 90.2 118.5 84.3 151.4 113.2 109.6 -0.32WA 90.7 161.8 114.1 85.9 57.9 115.5 111.1 0.65WV 129.1 78.2 58.8 75.4 88.8 107.4 68.3 -0.83WI 84.4 102.5 92.3 85.3 72.2 44.3 100.1 0.59WY 340.5 171.7 89.7 75.3 131 175.7 81.5 0.67
Correlation with Social Capital
0.298 0.126 0.347 -0.340 -0.097 0.196 0.050 1.000
Correlation with Economic Performance
-0.305 0.329 0.313 0.481 0.162 0.224 1.000 0.050
NOTE: All index numbered calculated so that 'best value' is highest value (i.e., lower unionization equals higher index value). * Average of individual economic indicators ** Data derived from Robert Putnam, Bowling Alone
Table A3: Correlations between Variables A B C D E F G H I J K L M NA SOCIAL CAPITAL INDEX 1.00 B Per Capita Income, 1980-00 0.10 1.00 C Change in Income, 1980-00 0.07 0.37 1.00 D Gross State Product, 1986-01 -0.09 0.07 -0.02 1.00 E Employment Growth, 1980-01 -0.13 -0.09 -0.09 0.82 1.00 F Unemployment Rate, 1980-01 -0.58 0.32 0.39 0.13 0.20 1.00 G Value-Added/Worker, 1982-00 0.03 0.38 -0.17 -0.02 -0.04 -0.05 1.00 H ECONOMIC PERFORMANCE INDEX 0.05 0.33 0.15 0.86 0.86 0.45 0.21 1.00 I Private Capital (per capita), 1980-97 0.30 -0.26 -0.49 -0.29 -0.23 0.04 0.04 -0.31 1.00 J Public Capital (per capita), 1980-96 0.13 0.37 -0.23 0.29 0.22 0.16 0.14 0.33 0.39 1.00 K Educational Attainment. 1989-2000 0.35 0.75 0.40 0.08 -0.07 0.43 0.34 0.31 -0.27 0.17 1.00 L New Business Start-Ups, 1994-98 -0.34 0.18 -0.01 0.49 0.56 -0.11 0.06 0.48 -0.39 0.05 0.16 1.00 M Unionization, 1983, 1985, 1995-00 -0.10 -0.56 -0.03 0.11 0.37 0.22 -0.16 0.16 0.20 -0.23 -0.29 0.05 1.00N Industrial Structure, 1982-2000 0.20 0.10 -0.31 0.11 0.25 0.11 0.19 0.22 0.45 0.51 0.20 0.27 0.13 1.00