Civic Capital as the Missing Link_Zingales et al.

International Economics & Finance 07/12/2011

Luigi Guiso, Paola Sapienza, Luigi Zingales (2010)

Mattia Bardella
Nicola Cenedese
Matteo Griggio

1. Definitions of social capital
2. Accumulation & Depreciation
3. Measurement
4. Origins of civic capital (CC)
5. Economic effects of CC
6. Conclusions & further research
Civic Capital a the missing link 07/12/2011 2

3. Measurement

 Ambiguity due to the wide use of the term
 Solow’s criteria (1995) for capital

1. Identifiable and measurable stock;

2. Measurable non-negative economic payoff;

3. Clear mechanisms of accumulation and
depreciation;

4. Distinguishable from other types of capital (e.g.
human capital).


"the aggregate of actual or potential resources
which are linked to possession of a durable
network of more or less institutionalized
relationships of mutual acquaintance and
recognition" (Bourdieu, 1983)

1. Stock
2. Positive payoff
3. Accumulation and depreciation
4. Distinguishable: not different from human capital


“set of relationships that supports effective norms“
(Coleman, 1990)

1. Stock: no separation input/ouputs
2. Positive payoff: can become social liability
3. Accumulation and depreciation: new relationships =
= inv./disinv.?
4. Distinguishable


“Social capital is a property of large groups, even
nations (not individual), similar to Machiavelli’s
civic virtue”

1. Stock: no separation input/ouputs
2. Positive payoff
3. Accumulation and depreciation: unclear process of
inv./disinv.
4. Distinguishable


“those persistent and shared beliefs and values that
help a group overcome the free rider problem in
the pursuit of socially valuable activities”

VALUES BELIEFS


“those persistent and shared beliefs and values that
help a group overcome the free rider problem in
the pursuit of socially valuable activities”
1. Stock
2. Positive payoff
3. Accumulation and depreciation
4. Distinguishable


3. Measurement

1. Intergenerational transmission of values from
parents to children

2. Education

3. Socialization


 Tabellini (2008):
 Transmission of values
 Assesment of children’s welfare in term of
parents’ values
 Network effect
 GSZ (2008) model of beliefs
 Overlapping model < --- > updated priors
 Positive/negative prior < --- > net perceived
benefit of cooperation vs. non cooperation
 Temporary positive shocks --- > persistent
changes


 CC = set of virtues learnt at school

 Substitution effect regulation/CC

 Payoff for the whole society

Need for public financing to education

 Doubt: different styles of education


 Social pressure

 Difference between beliefs and values
 BELIEFS
 Always transmitted through socialization
 Asymmetry between accumulation/deterioration

 VALUES
 Normally embedded in preferences
 Transmitted if conformism desire


 Religion as source of socialization

 Difference between more/less hierarchical
religions
 Decentralization in Protestantism

 Hierarchy in Catholicism

 Religious people more intolerant of diversity


1. Change in economic and social factors

2. Historical events generating mistrust

3. Changes in moral acceptability of certain
behaviors


 Clear investment process
Intergenerational transmission,
education, socialization

 Clear difference from human capital

 Accumulationprocess consistent with
methodological individualism
can be included in standard economic
models


 Long time for accumulation

 Increasing returns to scale


3. Measurement

 Direct measures
VALUES BELIEFS

WVS; European social survey;
General social survey,
SURVEYS
Eurobarometer; German social
economic panel

Public good game Trust game (Berg,
EXPERIMENTS (Camerer and Fehr Dickhaut and
2003); McCabe 1995)

 Indirect measures


 Qualitative answers

 Pre-determined questions


VALUES BELIEFS

SURVEYS

EXPERIMENTS

 Panel on values and beliefs of 80 countries
worldwide

 Choice of questions testing free-riding
attitude

 Answers on Likert scale
 1 = min cooperation/contribution to public good;

 10 = max cooperation/contribution

VALUES BELIEFS

SURVEYS

EXPERIMENTS


VALUES BELIEFS

SURVEYS

EXPERIMENTS

Problem: poor incentives to reveal true values


VALUES BELIEFS

SURVEYS

EXPERIMENTS

Denmark

Japan

Canada

Norway

Italy

General correlation with economic
development


VALUES BELIEFS

SURVEYS

EXPERIMENTS

Sweden
Denmark
Germany
USA

Italy

Use of Tabellini (2009) model to verify
consistency

Solution: less incentive to lie because of less
subjective questions


VALUES BELIEFS

SURVEYS

EXPERIMENTS

N= participants
S = $ given to each participant
NxS = total endowment
= percentage of S returned to administrator by participant i

= = effective percentage of NxS received by the administrator

= pre-determined threshold of overall endowment whose reaching
implies a social benefit, for each participant, higher than S

If more than N participants free-ride, everyone loses;
is an indicator of civic capital in a community


VALUES BELIEFS

SURVEYS

EXPERIMENTS

ADVANTAGES SHORTCOMINGS

Simple structure which facilitates Not very representative samples
interpretation of behaviors; (undergraduate students);

Real money can make answers Experimenter effect bias
incentive compatible


VALUES BELIEFS

SURVEYS

EXPERIMENTS

 Use of TRUST as proxy of beliefs
 Major determinant of investing and saving decisions

 It can be measured as a probability

 Higher values of probability enhance cooperation
(Gambetta 1988)

 Generalized vs. Personalized


VALUES BELIEFS

SURVEYS

EXPERIMENTS

Correlation trust/economic
development;

High variability;

Positive economic payoff


VALUES BELIEFS

SURVEYS

EXPERIMENTS

WVS P.C. - TRUST TABELLINI P.C. - TRUST

Correlation patterns confirm validity of previous measures regarding values


VALUES BELIEFS

SURVEYS

EXPERIMENTS

Increasing values of personalized trust
Correlations


VALUES BELIEFS

SURVEYS

EXPERIMENTS

(European social survey)

VALUES BELIEFS

SURVEYS

EXPERIMENTS

 Crucial role of WORDING
 Risk of endogeneity in the model

 Individual preferences (such as
betrayal aversion)
may be included in answers collected.


VALUES BELIEFS

SURVEYS

EXPERIMENTS

E = € owned by A

S = € sent to B

multiplier applied to S (generally, )

= The fraction of initial endowment given to the receiver in stage 1
(behavioral measure of trust)

Fraction x of = sum returned to the sender, in stage 2 (measure of
trustworthiness )


 Once social capital is defined as CC, it can be measured
 Measures of the diffusion of civicness and morality norms
 Measures of beliefs that help characterize the stock of civic
capital
 COHERENCE WITH SOLOW’S REQUIREMENTS
 However
 Need to select the right indicators;
 Interpretational biases;
 Cross-country comparability (high variability).


 They represent measures of outcomes (input is CC)
 In general, they are difficult to interpret because of
contamination (ex: institutional effect)
 Relationship input/output should not be affected by
other factors, otherwise endogeneity
 Blood donations
 Electoral participation
 Parking violation by UN diplomats


 no economic payoff;

 no legal obligation

 voter turnout = cost to sustain for producing the
public good

 in some Italian regions, civic capital is higher

 positive correlation of BD and EP, but far from
perfect

 Un diplomats are the statistical units

 PV not punished until 2002 in Manhattan = no
legal enforcement

 So, the only reason why one should violate
parking rules is related to cultural norms


GDP per capita > $ 20.000

GDP per capita < $ 20.000

Possible explanation: trust’s usefulness directly proportional to
sophistication of economic transactions

control


3. Measurement

CROSS COUNTRY REGRESSIONS
 Use 3 determinants of CC:
 Trust in strangers (WVS)

 Parking violation (Fisman & Miguel, 2010)

 Principal component of civic values (WVS)

 Problem: impossible to make any causal statement
Use of log GDP as control variable


TRUST IN
STRANGERS

 Only 45% of
cross
country
variation in
CC

VIOLATION

 Almost non
significant
correlation
with all
variables

PC of CIVIC
VALUES

 NO
significant
correlation

TABELLINI (2009)
 Better analysis of relationship between history and civic
capital
 Variation of norm & beliefs across regions of Europe
 CC as WVS trust and P.C. of cultural values
 Causality: use country fixed effects
 Key idea (Putnam 1993): brutal regimes are vehicles for
mistrust creation


COLLAPSE OF ROMAN SACRED EMPIRE
(beginning of 2ND millennium)
 Differences between North & South of Italy:
 South: Efficient Norman Monarchy
 North: political vacuum, so birth of
cooperative institutions (COMMUNES)
cooperation for production
of the public good
 Putnam conjectures (1993): historical episodes justify
differences between North & South
 GSZ (2008): comparison WITHIN NORTH, not just between
N&S


 Analysis within the North: Not all cities became
indipendent: some quickly lost it, some loyal to the
Emperor/Feudal Lord

 USE 2 CONTROL VARIABLES:
 City seat of a Bishop (facilitate coordination)
 Founded by Etruscans or not (proxy of defense capability)


RESOURCES’ EXPLOITATION
 Ostrom (1990)
 mountainous areas induces high cooperation and mutual
trust (forestry; cutting turns, pool and divide the
proceeds)
 sheep breeding areas: Sheppard can work alone, so no
cooperation required, so low trust and little cooperation

 Durante (2009): European areas with high climate
variability have more civic capital (higher level of trust)
 climate variability generates higher need for insurance,
thus more cooperation


 PRO: truly exogenous and randomized treatment
 CON: period of time
 CONDITIONAL CASH TRANSFER PROGRAM, COLUMBIA:
participation to meetings based on cooperation and mutual
trust topics, that can foster civic capital IF lessons learned
are implemented in real life

 ATTANASIO (2009): PUBLIC GOOD GAME between a 2y CCT
village and a non-CCT village

 BUT: not random selection of villages and unclear if
difference is longlasting


3. Measurement

 Standard economic models can explain only half of the
difference in economic performance (level of GDP per
capita) between countries.

 Civic capital could be the MISSING FACTOR to explain
the residual differences

 Challenge: find convincing sources of exogenous
variation to overcome endogeneity emerging when:
 CC reflects also the working of institutions
 CC is correlated with unobserved factors affecting also
performance
 CC is partially reverse-caused by current economic forces


 The narrower definition proposed can make easier to
identify CC within economic performance (and as one of
its determinants)

 Problem: it’s plausible to expect countries with higher
CC (strong values, high trust) chooses
institution that supports these values.

 Need of appropriate instruments to isolate the combined
effect of CC and institutions on economic performance
 2 main approaches in literature:
1. Links between past political institution and current
cultural traits
2. Movers approach and the idea of “cultural portability”


 Culture is transmitted slowly between generation
 Relevant historical episodes can predict today’s norms
and beliefs
 Key issue: the historical instrument don’t have effect on
todays’s output but affect it only trough its influence on
past culture
Intercultural transmission

Historical Cultural trait of Cultural trait of
episode former generations . current generations

Historical economic
Current economic
performance
performance


 Some examples:
 Literacy rates in XIXth and indicator of political institution from
1600 to 1850 to explain current difference in CC endowment
across Europe (Tabellini, 2009)
 Past history of communal independence to explain difference in
CC endowment across cities of northern Italy (GSZ, 2008)

 Major shortcoming
 Current differences in culture across regions could capture
differences in the actual performance of institution
 The historical episode could have fostered accumulation of
other forms of capital that still have an influence on economic
performance (i.e. arts)
 Need to obtain direct measures to control for them

 Fundamental intuition
 Norms and beliefs tend to move when people migrates
 Institutions are not portable

 so CC embedded in the migrant is due only to norms and
beliefs (not to institutions)

 then it’s possible to separate the effect on outcome of
institutions from the one of CC


 An example: Italian movers within Italy (GSZ, 2004)
 Test effect of CC on financial developement
 Controls for the province of birth to identify movers
 Dummies for the province of living to control for actual
performance of institutions
 civic capitalaffected by cultural
traits and not by institutions

 Results
 civic capital in the province of birth affect use and
availability of financial contracts (=trust) in the living
province


 GDP per capita and time-variation in trust (Algan and
Cahuc, 2008)
 Use of time variation in trust to eliminate institutions’
endogeneity

Correlation
Y = income per capita (institutional shocks)
S = trust (WVS)
X = vector of control
Fc = country fixed effect of time-invariant institutions that make
productivity change
Ft = time fixed effect of factor endowment and time varying
productivity
v = error term

 Substitute Sct with that is trust of the previous generation

No Correlation

 trust of previous generation affects trust of today generation
(through inter-generational transmission)
 transmission took place when current GDP wasn’t yet
produced
 so is orthogonal to the error because it does not include
the effect of institutional shocks
Endogeneity is removed

 Algan and Cahuc (2008) found a positive/significant and
quantifiable effect of civic capital on GDP per capita
Figure 10

The effect on GDP per capita
of a Swedish level of CC


3. Measurement

 Ambiguity in the definition of social capital has slowed
down the development of literature on the topic

 Civic capital definition satisfies Solow’s criteria

 Civic capital clearly differentiates social capital from
other kinds

 Civic is the missing factor of production which can help
explain the residuals of Solow’s model


 Current measures are not yet ready to be used in national
accounting

 Trust is the most promising component of a measure of CC
 Founded economically
 Easy to measure
 Correlated with variables of interests

 Clarify the determinants of persistence of CC
 Avoid policies that undermine CC, with negative long term
effects
 Boost policies that foster the formation and preservation of CC


Civic Capital as the Missing Link_Zingales et al.

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Andere mochten auch

Andere mochten auch (16)

Ähnlich wie Civic Capital as the Missing Link_Zingales et al.

Ähnlich wie Civic Capital as the Missing Link_Zingales et al. (20)

Civic Capital as the Missing Link_Zingales et al.