An Economic Analysis Of Social Capital

Social capital is some social factors based on social interaction, such as social relations, networks, trust, social rules and norms, which facilitate agents to fulfill their economic targets and bring economic benefits to them. There are two forms of social capital, which are structural and cognitive. Social capital can be divided into two analytical level, micro and macro level social capital. The former is civic social capital, and the latter government social capital.Since Putnam's pathbreaking studies, economists have increasingly been attracted by the concept of social capital. However, because of its methodology seemingly having sociological traditions, the feasibility that social capital theory may be applied in economic sphere has always been oppugned. From the perspective of methodology, there are four questions or challenges. Firstly, is social capital theory able to enter into economic analytical framework? The essence of social capital analytical paradigm is that social factors are added to which affect individuals economic behaviors. And then, in what degree does social capital deflect from economic analytical paradigm? Secondly, what are the mechanisms that social capital affects individuals'economic behaviors and governments'economic performance? Thirdly, what are the characteristics of these mechanisms? Finally, how do we explain these mechanisms with economic theories, methods and models? These questions will be answered by this dissertation.The"weak embeddedness"hypothesis is the behavioral basis of economic analyses of social capital. Individuals'economic behavior is embedded in social structure and cognitive concepts."Weak embeddedness"indicates that social networks and cognitive concepts not only affect, but also are shaped by individuals'behaviors. So social capital, such as networks and trust is the result of purposeful behaviors of individuals and groups. Although social capital paradigm based on"weak embeddedness"hypothesis modifies a part of cores of neo-classical paradigm based on"rational economic man"behavioral hypothesis, it reserves the latter's marrow, that is purposeful behavior and equilibrium structure of economy. So, from the perspective of methodology, social capital theory is able to enter into economic analytical framework.Mechanisms of various form and level social capital are different. In the main, micro level social capital resolves problems happening in market missing and failure. It enhances the inclination of cooperation, promotes the realization that the collective behaviors, and bring economic benefits to agents by means of spreading and sharing information ,coordination, amending the preference, restraining opportunism action and social punishment. Social capital on macro level is social infrastructures which provides fundamental environment that facilitates society and economy system to run. It promotes more resources to be used productively and improves return rates of economic activities.Social capital has complementarities that indicate that different elements of economy must fit and match each other. Complementarities of social capital are manifested in that various form of and level social capital must be complementary and social capital and other forms of capital ,such as physical capital and human capital, must be complementary. When social capital matches other economic variables, such as technology, accumulation of capital etc., and every element of social capital matches each other, social capital accordingly promotes economic growth, otherwise it will hinder growth. Complementarities have two forms of economic consequences. On the one hand, it leads to multiple equilibria, that is, due to different initial conditions, economy may arrives at equilibrium with high level of capital and output or with low level of capital and output. On the other hand, social capital is not always good for economy. The micro level social capital is one means of replacement of market or resolving market failures, it is not always the most efficient one for the economy, although is efficient for individuals.The dissertation explains these mechanisms and complementarities of social capital with economic theory models, such as growth model, job searching and matching model, distribution model and economy exchange model.The dissertation includes 8 chapters.Chapter one is an introduction, which explains study background, purpose, methods, significance, the basic concept and structure of this dissertation. Chapter two lists the literatures concerning social capital and analyses their characteristics respectively. Chapter three analyses the paradigm of social capital. It indicates that although social capital paradigm modifies a part of cores of neo-classical paradigm, it reserves the latter's marrow. So, from the perspective of methodology, social capital theory is able to enter into economic analytical framework. Chapter four analyses the formation of social capital, and empirically studies rural social capital formation in China. Chapter five analyses mechanisms of micro level structural social capital in economic growth, job searching, distribution and economy exchange economic models. Chapter six analyses the mechanisms of micro level cognitive social capital in economic growth model. Chapter seven studies a growth model with government social capital and provides an empirically study on it based on a set of across-countries data. Chapter eight present the conclusions and outlook of social capital theory study.