Bridging or Bonding: Economic Payoff to Social Capital, with an Application to Russia
Abstract: Pro-social norms and other ingredients of social capital are shown to be conducive for economic development, institutional performance, and quality of governance. No such analyses were available for Russia so far, and the present paper fills this gap. We propose a model which dierentiates the economic impact of bridging and bonding social capital - while the former increases government accountability, the latter is mobilized to seek protection from government predation and make up for insucient public provision of social services. We show that in equilibrium such grassroots private alternatives to publicly supplied institutions and programs could have overall detrimental impact on development by reducing the political costs of abuse of power. These conclusions are conrmed empirically by using data of a major Russia-wide survey held in 2007. We establish a significant positive relationship between bridging social capital and urban development in Russia; bonding social capital has a strong negative impact on development.