Exploring the mediating effect of social capital on human capital in economic well-being: A micro-analysis of four countries

Open Access
Li, Shujie
Graduate Program:
Agricultural Economics and Demography
Doctor of Philosophy
Document Type:
Date of Defense:
August 29, 2012
Committee Members:
  • David Gerard Abler, Dissertation Advisor
  • David Gerard Abler, Committee Chair
  • Stephen Michael Smith, Committee Member
  • Stephan J Goetz, Committee Member
  • David Shapiro, Committee Member
  • Jill Leslie Findeis, Committee Member
  • social capital
  • human capital
  • economic well-being
  • development
  • United States
  • Japan
  • Brazil
  • the Philippines
While the importance of human capital and social capital have been widely recognized in a range of social phenomena, the mediating effect of social capital on human capital is only occasionally acknowledged. This study examines the role of social capital in the relationship between human capital and economic well-being. Both the additive effect and the interaction effect of social capital with human capital are considered to better depict its significance with a cross-cultural perspective. Drawing on the International Social Survey Programme (ISSP 2001) on social networks and social support, the study focuses on four countries: two developed countries – the United States and Japan, and two developing ones – the Philippines and Brazil. The outcome variable of interest is individual economic well-being as measured by individual wages. Human capital is measured by formal schooling and work experience, and social capital by a diversity of social contacts (i.e., relatives and close friends) and social engagement in various groups or associations. Econometric models (e.g., OLS, Heckman Selection model, and SUR model) are used to test the roles of social capital in different contexts. The empirical findings are mixed and heterogeneous. The significance of human capital remains for all the four countries, reaffirming the theory of human capital. However, different aspects of social capital (bonding, bridging and linking) tend to demonstrate different effects for different countries. In spite of the mixed results, social capital is not negligible in terms of its magnitude and significance, but rather deserves further specific study in depth to reveal the effect of each of the indicators. Furthermore, social capital is never meant to substitute but complement human capital either in positive or negative effects, as it is commonly observed in the real world that people utilize the social capital at their disposal from time to time out of habit. It may also be the case that people are asked for help by their network ties, bearing losses to a certain degree, to benefit the latter's economic well-being. In other words, certain types of social capital amplify human capital while others offset human capital in their effects on economic well-being, or compensate for lower levels of human capital. There are two limitations of this study. First of all, the measurement of social capital needs to be further refined so as to cover not only the quantity of social network ties but also the quality of these ties, both of which matter in social contexts. Second, the cross-sectional data from the ISSP survey on social networks do not allow drawing causal inferences for social capital in the relationship between human capital and economic well-being. Even though the current research design considers the possible sample selection issues and uses both the Heckman selection model and the SUR model, it does not consider the potential endogeneity of social capital in the process of social and economic development. Further causal inferences would be able to shed more light on how social capital is leveraged for human capital to work best towards the improvement of economic well-being. Should panel data be available in the future survey cycles, this issue might be addressed by controlling for potentially unobservable factors. In addition, social capital is so complex a topic that it is highly contingent on social culture and economic institutions. Cross-cultural comparisons are very interesting but would be more insightful if cultural factors were included in the theoretical framework. These limitations deserve future research.