The Impact of Social Capital on Economic and Social Outcomes c 2008 I.˙ S. Ak¸comak All rights reserved. Cover artwork by I.Semih˙ Ak¸comak Prepared with LATEX Published by Universitaire Pers Maastricht ISBN 978 90 5278 799 2 Printed in the Netherlands by Datawyse Maastricht The Impact of Social Capital on Economic and Social Outcomes Proefschrift ter verkrijging van de graad van doctor aan de Universiteit Maastricht, op gezag van de Rector Magnificus, Prof. Mr. G.P.M.F. Mols, volgens het besluit van het College van Decanen, in het openbaar te verdedigen op donderdag 12 februari 2009 om 14.00 uur door Ibrahim˙ Semih Ak¸comak UMP UNIVERSITAIRE PERS MAASTRICHT Promotor: Prof. Dr. P. Mohnen Co-promotor: Dr. B.J. ter Weel, Centraal Planbureau en Universiteit Maastricht Beoordelingscommissie: Prof. Dr. L. Borghans, voorzitter Prof. Dr. J.H. Garretsen, Rijksuniversiteit Groningen Prof. Dr. H.L.F. de Groot, Vrije Universiteit Amsterdam Prof. Dr. L.L.G. Soete Prof. Dr. B. Verspagen This research is financed by Maastricht Research School of Economics of Technology and Organizations (METEOR) Contents 1 Introduction 1 1.1 From informal societies to social capital . 2 1.2 Main argument . 6 1.3 Outline of the thesis . 11 2 Bridges in social capital: A review of the literature and the social capital of social capital researchers 15 2.1 Introduction . 15 2.2 Origins of social capital . 18 2.3 Social capital . 20 2.3.1 Defining social capital . 21 2.3.2 Is social capital a form of “capital”? . 28 2.3.3 “Adverse” social capital . 30 2.4 Issues on social capital . 30 2.4.1 Efficiency gains from social capital . 30 Social capital and innovation . 31 Social capital and crime . 33 2.4.2 Social capital and formal institutions . 34 2.4.3 Measurement of social capital . 36 2.5 Social capital of social capital researchers . 37 2.6 Conclusion . 44 3 Social capital, innovation and growth: Evidence from Europe 47 3.1 Introduction . 47 3.2 Theoretical background . 50 3.2.1 Framework . 51 Production . 51 Innovation and social capital . 52 Putting the arguments together . 53 3.2.2 Empirical implications . 54 3.3 Data and descriptives . 55 3.3.1 Social capital . 55 3.3.2 Innovation, performance and education . 58 3.3.3 Institutions, literacy and universities . 61 Historical data on literacy . 61 Historical data on universities . 62 i ii CONTENTS Historical data on institutions . 63 3.4 Empirical strategy . 65 3.5 Estimation results . 67 3.5.1 The effect of social capital on growth . 67 3.5.2 The effect of social capital on innovation . 69 3.5.3 Stability . 69 3.5.4 Social capital, innovation and growth . 75 3.6 Conclusion . 81 4 How do social capital and government support affect innova- tion and growth? Evidence from the EU regional support pro- grammes 83 4.1 Introduction . 83 4.2 Social capital and implementing policies . 85 4.2.1 Theoretical background . 85 4.2.2 Previous empirical research on social capital and economic outcomes . 87 4.2.3 EU regional support programmes . 88 4.3 Data description and strategy . 90 4.3.1 Data and descriptive statistics . 90 Social capital . 90 Structural funds . 92 Economic performance . 93 Innovation . 93 4.3.2 Empirical implementation . 95 4.4 Results . 97 4.4.1 Economic growth . 97 4.4.2 Innovation . 100 4.5 Discussion and implications . 103 4.5.1 Policy implications for innovation . 103 Education . 103 EU programme effectiveness . 104 Institutions . 104 4.5.2 Italy . 105 4.5.3 Conclusion . 106 5 Social capital and crime: Evidence from the Netherlands 109 5.1 Introduction . 109 5.2 Conceptual framework . 114 5.2.1 Defining social capital . 114 5.2.2 Social control and community organization . 115 5.2.3 Operating the concept . 116 5.3 Data and descriptives . 118 5.3.1 Social capital . 119 5.3.2 Crime . 122 5.3.3 Instrumental variables . 123 5.4 Empirical strategy . 123 CONTENTS iii 5.5 Results . 125 5.5.1 OLS estimates . 125 5.5.2 2SLS estimates . 132 5.5.3 Robustness . 134 Subsamples . 134 Different Types of Crime . 134 Social Capital Indicators . 135 Differences in Income . 140 Population Heterogeneity . 141 5.6 Conclusion . 144 6 Investing in institutions: The case of Turkey and the EU mem- bership 145 6.1 Introduction . 145 6.2 Historical context, past and present . 147 6.2.1 Economic and political issues governing membership . 148 The strength of the ‘against’ camp in Turkey . 151 6.2.2 How common are European values and how different is Turkey?154 Approach . 154 Empirical findings . 155 6.3 A sustainable institutional framework . 160 6.4 Discussion and Conclusion . 169 7 Concluding remarks 171 7.1 Summary of the main findings . 171 7.2 Suggestions for future research . 176 Bibliography 179 A Appendix to Chapter 3 199 A.1 Variable definitions . 199 A.2 Further details on historical data . 201 A.2.1 Historical data on literacy rates . 201 A.2.2 Historical data on urbanization and population . 203 A.2.3 Historical data on institutions . 203 A.2.4 Historical data on universities . 206 A.3 Further analysis on the stability . 206 A.4 Further analysis on the stability of TRUST . 211 A.5 Estimation results with internet use as an indicator to innovativeness212 B Appendix to Chapter 5 215 B.1 Details on variable definitions and data sources . 215 B.1.1 Social capital indicators . 216 B.1.2 Crime data . 218 B.1.3 Historical data . 219 iv CONTENTS C Appendix to Chapter 6 227 C.1 Definition of institutional indicators . 227 C.2 Detailed result of analysis of EVS . 228 Samenvatting 233 Curriculum Vitae 237 List of Tables 2.1 A comparison between physical, human and social capital . 25 2.2 Summary statistics of co-authorship network on social capital . 44 3.1 Growth, trust, innovation and historical variables by country . 56 3.2 Summary statistics . 65 3.3 Pairwise correlations between the instruments and trust . 68 3.4 Social capital and per capita income growth . 70 3.5 Alternative specifications for per capita income growth . 71 3.6 Social capital and innovation . 72 3.7 Alternative specifications for innovation . 76 3.8 Stability of the growth regressions . 77 3.9 Stability of the innovation regressions . 78 3.10 Social capital, innovation and growth (3SLS Estimates) . 79 3.11 Stability of trust in 3SLS estimations . 80 4.1 The measurement of social capital . 90 4.2 EU support as a percentage of GDP . 94 4.3 Growth in EU regions: per capita GDP growth, 1990-2002 . 99 4.4 Growth of patent applications 1991-2000: Results of 2SLS estimations102 4.5 Case of Italy . 105 5.1 Correlations among social capital indicators . 112 5.2 Summary statistics for municipalities>30,000 inhabitants . 121 5.3 OLS results for crime and alternative indicators for social capital (base) . 127 5.4 OLS results for crime and alternative indicators for social capital (extended) . 129 5.5 Summary results for alternative indicators for social capital (OLS) 131 5.6 2SLS results for crime and social capital . ..