| The social capital between two parties has been examined with respect to its influence on contract terms. Social capital can be defined as "a person or group's sympathy for or sense of obligation to another person or group". Recent economic literature has failed to fully take into account the reciprocal nature of social capital. Here a theoretical model is developed taking the reciprocal nature into account. As the social capital between two parties increases the maximum willingness to pay and minimum willingness to accept diverge, making the determination of a directional impact of social capital without additional information difficult. The theoretical model is empirically tested using data collected from farmers, on land rental, who rent land in southern and western Ontario Census Agricultural Regions. The empirical evidence does not show a clear directional sign for the impact of social capital on the terms of trade for farmland rental. |
