The monetary value of social capital

The purpose of this study is to estimate the monetary value of social capital by considering its multidimensional nature. Four dimensions are conceptualized: Interpersonal trust, institutional trust, trustworthiness, and participation in civil society (formal and informal). The monetary value is obtained by including social capital in a well-being function and estimating the shadow price of social capital. The empirical analysis is based on data from the European Values Survey covering 45 European countries. A generalized ordered response model is estimated to account for possible heterogeneity of social capital indicators among the ten different subjective well-being levels. The results show that on average a one standard deviation increase in interpersonal trust (people's fairness) is worth an extra € 7913 per year in terms of foregone income, the same increase in institutional trust is worth € 7405, and the same increase in the importance of family is worth € 7312. The findings indicate that social capital has significant monetary value to individuals. This should be considered when designing government policies aiming at, e.g., labor market mobility that are accompanied by a decreasing social capital stock that, in turn, may negatively affect economic and political development.