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The monetary value of social capital

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  • Orlowski, Johannes
  • Wicker, Pamela

Abstract

The purpose of this study is to estimate the monetary value of social capital by considering its multidimensional nature. Four dimensions are conceptualized: Interpersonal trust, institutional trust, trustworthiness, and participation in civil society (formal and informal). The monetary value is obtained by including social capital in a well-being function and estimating the shadow price of social capital. The empirical analysis is based on data from the European Values Survey covering 45 European countries. A generalized ordered response model is estimated to account for possible heterogeneity of social capital indicators among the ten different subjective well-being levels. The results show that on average a one standard deviation increase in interpersonal trust (people's fairness) is worth an extra € 7913 per year in terms of foregone income, the same increase in institutional trust is worth € 7405, and the same increase in the importance of family is worth € 7312. The findings indicate that social capital has significant monetary value to individuals. This should be considered when designing government policies aiming at, e.g., labor market mobility that are accompanied by a decreasing social capital stock that, in turn, may negatively affect economic and political development.

Suggested Citation

  • Orlowski, Johannes & Wicker, Pamela, 2015. "The monetary value of social capital," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 26-36.
  • Handle: RePEc:eee:soceco:v:57:y:2015:i:c:p:26-36
    DOI: 10.1016/j.socec.2015.04.007
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    Cited by:

    1. van Hoorn, André, 2018. "Is the happiness approach to measuring preferences valid?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 53-65.
    2. Johannes Orlowski & Pamela Wicker, 2018. "Putting a Price tag on Healthy Behavior: The Monetary Value of Sports Participation to Individuals," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 13(2), pages 479-499, June.
    3. Anna Maccagnan & Tim Taylor & Mathew P. White, 2020. "Valuing the Relationship Between Drug and Alcohol Use and Life Satisfaction: Findings from the Crime Survey for England and Wales," Journal of Happiness Studies, Springer, vol. 21(3), pages 877-898, March.
    4. Cunningham, George B. & Fairley, Sheranne & Ferkins, Lesley & Kerwin, Shannon & Lock, Daniel & Shaw, Sally & Wicker, Pamela, 2018. "eSport: Construct specifications and implications for sport management," Sport Management Review, Elsevier, vol. 21(1), pages 1-6.

    More about this item

    Keywords

    Happiness; Monetary value; Shadow price; Compensation valuation; Social capital; Subjective well-being; Trust; Generalized ordered probit model;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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