The Relation between Social Capital, Governance and Economic Performance in Europe

Abstract

Abstract. The literature on social capital stresses the relations between social capital (trust, social norms and networks), government effectiveness and economic performance. In empirical investigations the relationship between aforementioned items was clarified by using various indicators of social capital and different country samples. Due to this reason the results are hardly comparable. In this article we aim to examine the strength of the relationship between social capital, governance quality and economic performance by using the same indicators of social capital and the same country sample (23 European countries). The study has indicated that both social capital and government indicators are related to economic performance and to each other. Results showed the positive correlation of two social capital dimensions, namely trust and networks, with economic performance indicators and governance indicators, while civism dimensions do not correlate either with economic performance or with governance indicators. In this paper we used three economic performance indicators, namely GDP per capita in Purchasing Power Standards, labour productivity per person employed and percentage of gross domestic expenditure on R&D (GERD) financed by industry.

Intangible factors and productivity: Evidence from Europe at the regional level

“…Using a sample of 23 European countries, Jankauskas & Šeputienė (2007) found both trust and networks to have a remarkable positive relationship with labour productivity. At the same time, civism did not correlate with labour productivity in their analysis.…”

“…When analysing the impact of social capital on economic growth, innovation, or productivity, two important aspects of social capital are mostly examined in the literature: networks and trust (Dakhli & de Clercq, 2004;Knack & Keefer, 1997;Landry, Amara, & Lamari, 2002;Heliwell, 1996;Casey & Christ, 2005;Beugelsdijk & van Schaik, 2005;Jankauskas & Šeputienė, 2007). There are many mechanisms through which social capital may impact productivity (see Kaasa (2016a) for an exhaustive overview).…”

“…There are many mechanisms through which social capital may impact productivity (see Kaasa (2016a) for an exhaustive overview). What is very often mentioned is that social capital helps the diffusion of information and knowledge (Jankauskas & Šeputienė, 2007;Sabatini, 2008;Yamamura & Shin, 2012;Di Guilmi et al, 2008;Grafton, Kompas, & Owen, 2004;Beugelsdijk & van Schaik, 2005). Trust also encourages co-operation between firms and hence allows a more effective use of resources (Bjørnskov & Méon, 2010;Beugelsdijk & van Schaik, 2005).…”

“…Networks are claimed to have a synergy effect, bringing together skills and different ideas which may lead to radical breakthroughs that remarkably improve productivity (Subramaniam & Youndt, 2005;Kaasa, 2009). In a trusting environment workers tend to be more motivated (Jankauskas & Šeputienė, 2007;Sabatini, 2008;Di Guilmi et al, 2008), but social networks may also provide more control among colleagues and a higher quality of effort (Sabatini, 2008;Di Guilmi et al, 2008). Social capital has been claimed to lower uncertainty and transaction costs (Beugelsdijk & van Schaik, 2005;Bjørnskov & Méon, 2010;Lekovic, 2012;Jankauskas & Šeputienė, 2007).…”

“…In a trusting environment workers tend to be more motivated (Jankauskas & Šeputienė, 2007;Sabatini, 2008;Di Guilmi et al, 2008), but social networks may also provide more control among colleagues and a higher quality of effort (Sabatini, 2008;Di Guilmi et al, 2008). Social capital has been claimed to lower uncertainty and transaction costs (Beugelsdijk & van Schaik, 2005;Bjørnskov & Méon, 2010;Lekovic, 2012;Jankauskas & Šeputienė, 2007). Trust within social networks serves as a substitute for a legal system, for example in contract monitoring and enforcement.…”