Contents

Abstract 1640

Keywords 1640

1. Introduction 1641

2. Social capital: Basic concepts 1642

2.1. Defining social capital 1642

2.2. Theefficiencyofsocialexchange 1645

2.2.1.

2.2.2. Social capital and trust 1646

2.2.3. Socialcapitalandpublicgoods 1647

2.3. Socialcapitalanddevelopment 1648

2.4. Social capital and equity 1650

3. When does social capital matter? 1651

3.1. Sourcesofinefficiency 1651

3.2. Channels 1652

3.2.1. Information sharing 1653

3.2.2. Group identity and modification of preferences 1654

3.2.3. Coordination and leadership 1656

3.3. Formal theory 1658

4. From theory to empirics: Econometrics and social capital 1660

4.1. Externalities and individual vs. aggregate effects 1661

4.1.1. Fallacy of composition 1661

4.1.2. Free riding 1663

4.2. Modelspecification 1663

4.2.1. Exchangeability 1663

4.2.2. Instrumental variables 1666

4.2.3. Group effects versus social capital effects 1666

Handbook of Economic Growth, Volume 1B. Edited by Philippe Aghion and StevenN. Durlauf

© 2005 Elsevier B.V All rights reserved

DOI: 10.1016∕S1574-0684(05)01026-9

4.3. Identification 1667

4.3.1. Individual-level data 1667

4.3.2. Aggregate data 1669

4.3.3. Identification with predetermined social capital 1670

4.4. Additional issues 1671

5. Empirical studies of the effects of social capital 1672

5.1. Individual-level studies 1672

5.1.1. Social capital and development 1672

5.1.2. SocialcapitalinOECDsocieties 1676

5.2. Aggregate studies 1680

6. Empirical studies of the level and determinants of social capital 1685

7. Suggestions for future research 1688

8. Conclusions 1692

Acknowledgements 1693

References 1693