HIER

Harvard Institute of Economic Research

Discussion Paper Number 1916

The Economic Approach to

Social Capital
By

Edward L. Glaeser
David Laibson
Bruce Sacerdote
March 2001

Harvard University
Cambridge, Massachusetts
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 NBER WORKING PAPER SERIES

THE ECONOMIC APPROACH TO SOCIAL CAPITAL

Edward L. Glaeser
David Laibson
Bruce Sacerdote

Working Paper 7728

http://www.nber.org/papers/w7728

NATIONAL BUREAU OF ECONOMIC RESEARCH

1050 Massachusetts Avenue
Cambridge, MA 02138
June 2000

Glaeser and Laibson thank the National Science Foundation, the Sloan Foundation, the MacArthur
Foundation and the Olin Foundation. Helpful comments and discussions were provided by Sam Bowles,
Robert Haveman, Larry Katz, Robert Putnam and Andrei Shleifer. Excellent research assistance was
provided by Stephen Weinberg. The views expressed herein are those of the authors and not necessarily
those of the National Bureau of Economic Research.

© 2000 by Edward L. Glaeser, David Laibson, and Bruce Sacerdote. All rights reserved. Short sections of
text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit,
including © notice, is given to the source.
The Economic Approach to Social Capital
Edward L. Glaeser, David Laibson, and Bruce Sacerdote
NBER Working Paper No. 7728
June 2000
JEL No. D0, J0, R0

ABSTRACT

To identify the determinants of social capital formation, it is necessary to understand the

social capital investment decision of individuals. Individual social capital should then be aggregated
to measure the social capital of a community. This paper assembles the evidence that supports the
individual-based model of social capital formation, including seven facts: (1) the relationship
between social capital and age is first increasing and then decreasing, (2) social capital declines with
expected mobility, (3) social capital investment is higher in occupations with greater returns to social
skills, (4) social capital is higher among homeowners, (5) social connections fall sharply with
physical distance, (6) people who invest in human capital also invest in social capital, and (7) social
capital appears to have interpersonal complementarities.

Edward L. Glaeser David Laibson

Department of Economics Department of Economics
Harvard University Harvard University
Littauer 200 Littauer 200
Cambridge, MA 02138 Cambridge, MA 02138
and NBER and NBER
eglaeser@kuznets.harvard.edu dlaibson@harvard.edu

Bruce Sacerdote
Department of Economics
Dartmouth College
Rockefeller Hall
Hanover, NH 03755
and NBER
bruce.i.sacerdote@dartmouth.edu