Social Capital and Economic Performance in the American States^*

Abstract

Objective. This study tests the claim that areas with higher levels of social capital have superior economic performance. Method. The 14‐measure index of social capital created by Robert Putnam is reconstructed for an extended time period and integrated into cross‐sectional regression models including physical capital, human capital, and other factors relevant to state economic performance. Results. The analysis shows that social capital has no discernable influence on aggregate measures of output and employment. However, it does have a positive and significant impact on measures of economic equality and employment stability. Conclusions. This study does not support the claim that social capital is a general prerequisite for prosperity, but it does suggest that it may serve to reinforce a particular mode of communitarian economic development.