Household Income and the OECD's Four Types of Social Capital

Social capital, possessed by each individual, acts like glue that keeps a society from disintegrating. In an old society in which external social bonds play an important role, ample incentives should exist for an individual to acquire social capital. In a modern economy, in which such social bonds play a minimal role, it is important to see if social capital translates into personal benefits. In order to capture such incentives, this study adopts the instrumental variable method and shows the two-way relationship in which social capital contributes to income at the same time that income contributes to social capital.