In a recent report, scientists from Michigan State University and Western Illinois University review the definition and origin of social capital, kernels of commonality and how these contribute to the creation of social capital, and how to measure the products of social capital. The authors also distinguish between bonding, linking and bridging social capital and between exchanges of socio-emotional goods and physical goods and services.

In Social Capital and Household Income Distributions: Evidence from Michigan and Illinois, the authors define social capital as a person’s or group’s sympathy toward another person or group that may produce a potential benefit, advantage and preferential treatment for another person or group of persons beyond that expected in an exchange relationship. Social capital, the authors conclude, is a resource increasingly recognized as having important economic and social consequences.

One important economic consequence of social capital is on household income distributions. The authors of this report asked if relationships between social capital and household incomes previously discovered at the state level were also present at the community level?

The results of this investigation support earlier findings that the distribution of social capital and the distribution and total of household income in a community are directly related. As the levels and density of social capital in a community increase, the disparity of household incomes decreases and the average level of household incomes increases.

The data used to conduct the study included U.S. Census data on household incomes for geographic units referred to as PUMAs (which frequently correspond to counties), data collected from a mail survey designed to measure different kinds of social capital, and data obtained from a telephone survey of community leaders.

An important finding of this study, also present in an earlier study, was that households headed by a single parent, especially a teenage unwed mother, lack important social capital resources. These social capital deficiencies appear to produce higher infant mortality rates, lower high school graduation rates, higher high school dropout rates, higher rates of juvenile arrests, lower labor force participation rates, and higher rates of transfer payments.

Another focus of this study was on the role of socio-emotional goods that provide validation, experiences of caring, and information. This study examined the connection between bonding, linking and bridging social capital and the provision of socio-emotional goods and physical or economic goods.

The study found that individuals appear to make tradeoffs between economic goods and services and socio-emotional goods, and between investments in bonding, linking and bridging social capital. The study also found evidence that those individuals with strong preferences for socio-emotional goods and bonding social capital appear to be less mobile, get together with friends and family members frequently, are generally less satisfied with their communities, earn less income, and attain lower levels of education than those with stronger preferences for physical goods and linking and bridging social capital.

This project was funded by a grant from the North Central Regional Center for Rural Development.

A copy of the report can be obtained by contacting Lindon Robison at robison@msu.edu or Marcelo Siles at siles@msu.edu. Please specify Michigan State University Department of Agricultural Economics Report #605 or Research Report #12 of the Social Capital Initiative.