Social Capital and Regional Economy: Empirical Analysis Using Individual Data from Questionnaire Survey

With the recent difficult regional economy, the concept called "Social Capital" has been drawing attention as a factor to revitalize regions. "Social Capital", according to Putnam (1993), is defined as the "features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit". The purpose of this paper is to perform empirical analysis to find out what kind of impact the three factors ("trust", "norm", and "network") have on regional economy. Not many researches have been made to quantify social capital so far, and therefore there is no established method for this purpose. Here in this paper, I have performed a regression analysis by using cross section data based on the result of questionnaire surveys conducted by the Cabinet Office (in 2002 and 2005) (individual data) which were used as and converted into prefectural indices for each of the three factors. As a result of the regression analysis using the instrumental variable approach, according to the data as of 2005, the "norm" had a positive impact on the rate of increase of business offices while the "network" had a negative impact on it. Also, according to the Barro Regression analysis of the impact on mid-term economic growth rate, general "trust" in others in a "wide" area had a positive impact on the economic growth of the said area (however, there is no spill-over effect on other areas), while, the "trust" in a "small" area, i.e. the "trust" in one's neighbors, friends and acquaintances, and relatives had a negative external impact on the surrounding areas. The above-mentioned results indicate both positive and negative aspects of social capital in terms of the regional economy of Japan - I therefore think it is meaningful to focus on these factors when developing a plan for future recovery of regional economy.