SOCIAL CAPITAL AND INCENTIVE COMPATIBILITY: MODELLING THE ACCUMULATION AND USE OF SOCIAL COLLATERAL

In economics, where the long resistance to reflecting on the effects of social interaction on economic behaviour is slowly waning, the concept of social capital may turn out to be a useful analytical tool. However, initial interest in social capital has produced a large variety of definitions, theoretical frameworks, empirical analyses, and even policy prescriptions. This paper provides a selective review and critique of some of the more recent literature on social capital. It then suggests that many of the problems in the existing literature can be addressed by lowering aspirations about what social capital is and reformulating it in terms of its impact on incentive problems in economic transactions in the presence of imperfect markets and costly or non-enforceable contracts. The paper finally advances a model of one of the ways that social capital resolves incentive compatibility problems, namely its role as a collateral asset


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/12623
Total Pages:
36
Series Statement:
Staff Paper Series No. 460




 Record created 2017-04-01, last modified 2017-08-23

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