DP15871 Social capital and economic growth in the regions of Europe

Author(s): Rune Dahl Fitjar, Jonathan Muringani, Andrés Rodríguez-Pose
Publication Date: March 2021
Keyword(s): bonding, bridging, economic growth, EU, regions, social capital
JEL(s): O17, O43, R11
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15871

Social capital is an important factor explaining differences in economic growth among regions. However, the key distinction between bonding social capital, which can lead to lock-in and myopia, and bridging social capital, which promotes knowledge flows across diverse groups, has been overlooked in growth research. In this paper, we address this shortcoming by examining how bonding and bridging social capital affect regional economic growth, using data for 190 regions in 21 EU countries, covering eight waves of the European Social Survey between 2002 and 2016. The findings confirm that bridging social capital is linked to higher levels of regional economic growth. Bonding social capital is highly correlated with bridging social capital and associated with lower growth when this is controlled for. We do not find significantly different effects of bonding social capital in regions with more or less bridging social capital, or vice versa. We examine the interaction between social and human capital, finding that bridging social capital is fundamental for stimulating economic growth, especially in low-skilled regions. Human capital also moderates the relationship between bonding social capital and growth, reducing the negative externalities imposed by excessive bonding.