The effects of social capital on wage income: a multi-country analysis

Abstract

We analyze the effect of individual social capital on wage income in European countries. A number of studies have already tested the earnings effects of social ties but the majority of them have been limited to small samples and/or to certain occupations. The major contribution of the paper is its assessment of the earnings effects of social capital in a multi-country context using a large international dataset, the EU-SILC. We estimate individual level earnings regressions for a pooled sample and for individual countries as well. Three indicators are used to measure social capital: memberships in voluntary organizations, the frequency of contacts with friends and frequency of contacts with relatives. Results indicate a significant positive association between social capital and wage income both for the pooled sample and the majority of the countries individually. The effect of social capital is stronger for post-socialist countries than for other countries while it is almost missing in the Nordic countries. Comparing the effects of memberships in voluntary organizations, friendship and kinship ties provides some support for the strength of weak ties hypothesis.