An Economic Approach to Social Capital*

Abstract

A standard optimal investment model can be used to analyse an individual's decision to accumulate social capital. We analyse six facts that support the predictions of this individual‐based approach: (1) social capital first rises and then falls with age, (2) social capital declines with expected mobility, (3) social capital rises in occupations with greater returns to social skills, (4) social capital is higher among homeowners, (5) social connections fall sharply with physical distance, (6) people who invest in human capital also invest in social capital. We fail to find robust evidence that social capital investments fall with the value of time or that geographic/religious groups generate social capital complementarities.