Bridging, not bonding, for regional growth

Jonathan Muringani, Rune Fitjar, Andrés Rodríguez-Pose 20 April 2021

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Social scientists have long recognised that economic growth is not just a function of physical or human capital, but also of the ability of the population to collaborate and exchange knowledge. Places where people trust each other and form dense informal and formal networks can sometimes prosper and grow well beyond expectations. Putnam  et al. (1993) classically explained differences in governance quality and prosperity between Northern and Southern Italy drawing on the stronger and sounder civic traditions of the North of the country. Later, Putnam argued that the erosion of social capital in the US represented a challenge for democracy and wellbeing (Putnam 2000). Various subsequent studies have shown that variations in social capital explain differences across regions (Beugelsdijk and Schaik 2005, (Storper 2013) and even in the spread of Covid-19 (Bartscher et al., 2020). It therefore comes as no surprise that the World Bank, the OECD and the EU are increasingly considering social capital as an important element in policies to promote growth. 

Social capital is built up of trust, networks and norms that enable individuals and groups to interact and exchange with each other. This promotes social cohesion and helps societies meet their collective goals. As individuals and groups operate within a regional context, social capital is often seen as a regional phenomenon, which differs from place to place (Rodríguez‐Pose and Storper 2006). 

Social capital was traditionally considered a unidimensional concept. However, Putnam (2000) made a key distinction between bonding and bridging social capital. Bonding social capital refers to closed networks linking homogenous groups or facilitating in-group relationships, while bridging social capital refers to open networks that link heterogeneous groups or facilitate out-group relationships. Bonding social capital is perceived to discourage economic activities because it excludes individuals and other economic actors that fall outside the group, diminishing interactions and exchanges. Similar ideas had previously been raised outside the social capital literature for some time. Edward Banfield (1958) used the term amoral familism to explain the economic backwardness of Montegrano in Italy, and Mancur Olson (1965) famously concluded that excessive networking within special interest groups discourages productive economic activities. 

In contrast, bridging social capital refers to open networks that encourage interaction and exchange between people not familiar with each other. There are at least two ways in which bridging social capital increases the circle of economic opportunities (Beugelsdijk and Schaik 2005 Beugelsdijk and Smulders 2009). First, the trust built up in these networks makes it easier for people to trust outsiders, facilitating the exchange of information and actual transactions. Second, by connecting heterogenous people or groups, bridging social capital widens the source and diversity of ideas fuelling innovation. In the same vein, Richard Florida (2005, 2014) has argued that more open and trusting societies are also more prosperous. 

While a large body of literature has shown the benefits of bridging social capital and the potentially harmful effects of excessive bonding, few have looked at the interdependencies between the two types of social capital, or at how their effects depend on other forms of capital. However, the two social capital types should not be taken as simple opposites (Storper 2013). Regions can have high levels of both bonding and bridging social capital, or low levels of both, and it is the balance between the two that either encourages or discourages economic growth. The extent to which bonding and bridging social capital discourages or encourages economic growth may also depend on the level of human capital in society (Fukuyama 1995). 

Bridging and bonding social capital and regional growth in Europe

In a recent paper (Muringani et al. 2021), we address these relationships by investigating how bonding and bridging social capital affect growth in European regions, and on how the effects of each type of social capital depend on the level of human capital in the region. We leveraged existing data at the individual level from the European Social Survey (ESS)1 and the European Values Survey (EVS)2 and aggregated them at the regional level to create measures of social capital. These measures were combined with existing data on human capital, other contextual factors, and the level of GDP per capita from the European Statistical Office (Eurostat)3 to create a data set with biennial data from 2002 to 2016 for 190 regions in 21 EU countries.  

A quick look at the data shows that the intensity of bonding and bridging social capital differs across European regions, as illustrated by the maps in Figure 1. The maps show that Western Europe has higher levels of both types of social capital than Eastern Europe, while bridging social capital is highest in the Nordic countries and around the city belt. The maps also show that there are important within-country differences in bonding and bridging social capital in several countries. 

Figure 1 Bonding (top) and bridging (bottom) social capital across EU regions, 2002-2016 (ESS and EVS)

Most regions with high levels of one type of social capital also have a high level of the other. Hence, their relationships with economic development can only be teased out by including both types in the model. The results of the analysis point to a negative association of bonding social capital with regional GDP per capita when controlling for the level of bridging social capital. In contrast, bridging social capital is positively connected with regional GDP per capita when controlling for bonding social capital. 

Second, human capital moderates both bonding and bridging social capital (Figure 2). For bonding social capital, human capital reduces the adverse association between bonding social capital and economic growth. Specifically, there is no significant relationship between bonding social capital and economic growth in regions with high levels of human capital. However, in low-skilled regions, high levels of bonding social capital are harmful for growth.

Figure 2 Moderating effects of human capital (tertiary education) on bonding (top) and bridging (bottom) social capital

The effect of bridging social capital declines as the level of human capital increases, suggesting that the two are to some extent substitutes. Thus, as the human capital endowment increases in a region, there is less need for bridging social capital. Indeed, bridging social capital is not significantly related to growth in the most high-skilled regions in Europe, whereas it is very important in low-skilled regions. 

In conclusion, not all types of social capital are the same for economic growth. Therefore, policymakers seeking to facilitate regional development should consider ways in which bridging social capital can be promoted. This is particularly important for growth in low skilled regions. Moreover, investing in human capital is crucial, not just per se, but also as a way to reduce the inefficiency and the related corruption (de Blasio et al. 2020) that drag economic growth down particularly in less-developed regions. 

References

Banfield, E C (1958), The Moral Basis of a Backward Society, The Free Press.

Bartscher, A, S Seitz, S Siegloch, M Slotwinski and N Wehrhöfer (2020), “The role of social capital in the spread of Covid-19”, VoxEU.org, 18 June.

Beugelsdijk, S and T Van Schaik (2005), “Social capital and growth in European regions: an empirical test”, European Journal of Political Economy 21(2): 301-324.

Beugelsdijk, S and S Smulders (2009), “Bonding and bridging social capital and economic growth”, Tilburg University.

de Blasio, G, A D’Ignazio and M Letta (2020), “Machines in the fight against corruption”, VoxEU.org, 27 November.  

Eurobarometer (2005), Social Capital from Special Eurobarometer

Florida, R (2005), Cities and the creative class, Routledge

Florida, R (2014), "The creative class and economic development", Economic Development Quarterly 28(3): 196-205. 

Fukuyama, F (1995), “Social capital and the global economy”, Foreign Affairs 74: 89.

Muringani, J, R Dahl Fitjar and A Rodríguez-Pose (2021), “Social capital and economic growth in the regions of Europe”, Environment and Planning A.

OECD (2001) The well-being of nations: The role of human and social capital.

Olson, M (1965), Logic of collective action: Public goods and the theory of groups, Harvard Economic Studies 124, Harvard University Press.

Putnam, R D, L Robert and N Raphaëlle (1993), Making democracy work, Princeton University Press. 

Putnam, R D (2000), Bowling alone: The collapse and revival of American community, Simon and Schuster. 

Rodríguez‐Pose, A  and M Storper (2006), “Better rules or stronger communities? On the social foundations of institutional change and its economic effects”, Economic Geography 82(1): 1-25.

World Bank (1998), The Initiative on Defining, Monitoring and Measuring Social Capital. Overview and Program Description, World Bank. 

Endnotes

https://www.europeansocialsurvey.org

https://europeanvaluesstudy.eu

https://ec.europa.eu/eurostat

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Topics:  Macroeconomic policy Politics and economics

Tags:  social capital, bridging social capital, bonding social capital, economic growth, Europe, trust

PhD, University of Stavanger (2021)

Professor of Innovation Studies at the UiS Business School, University of Stavanger

Princesa de Asturias Chair and Professor of Economic Geography, London School of Economics; Research Fellow, CEPR

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