The X-Factor? Social capital and economic well-being: A quantitative analysis

This first-of-its-kind report addresses how social capital is driving Minnesota’s economic well-being and whether policy changes can increase social capital at the state level. The research is based on new data on social capital from the Social Capital Project from the Joint Economic Committee of Congress. The X-Factor? Social capital and economic well-being: A quantitative analysis is authored by economist John Phelan and investigates the important question of why Minnesota and its neighboring states have such similar levels of employment when they pursue such different economic policies. Social capital is a large part of the answer.

Social capital refers to the networks and norms in a society; the connections we have and the things we commonly believe. Phelan explains why higher levels of social capital can be expected to generate higher levels of economic wellbeing. He explains why groups, such as recent immigrants, who are excluded from networks might suffer, even — perhaps especially — in places, like Minnesota, where levels of social capital are high. He also explains how some of the observed differences in economic wellbeing between groups are the result of differences in norms between groups. 

To investigate the question quantitatively, Phelan uses a new index of social capital produced by the Social Capital Project. Going deeper, he uses four subindices across 3,000 counties in the United States to measure their relationship with economic wellbeing, as measured by median household income. 

This wide-ranging report touches on some of the major social and economic debates in the United States today: the origins and persistence of racial and sexual disparities in economic well-being as a result of declining Family Unity concentrated among those with lower incomes and ethnic minorities; increased political discord as a result of declining Community Health; a rise in deaths of despair. This report can only summarize the vast body of scholarship on each of these issues, but not for nothing has family fragmentation been described as “the biggest problem we have,” “the largest or second-largest problem in America,” and the “shadow behind all sorts of other problems that people are much more easily conversant about.”

A full copy of the report can be viewed here.