The effect of social capital on investments: evidence from Europe. Sotsiaalkapitali mõju investeeringutele Euroopa riikide näitel

Abstract

The purpose of the current paper is to investigate empirically the effect of social capital on investments as a key production factor. Theoretically, investments are expected to be higher in societies where there is more social capital between economic agents. Based on the data from World Values Survey, ten components of social capital are considered as factors of investments. Although the regression results are rather mixed, it can be generalised that components related to trust and norms dominate as predictors of overall investment activity, while networks have some effect only for foreign investments. Additionally, it appeared that the relationship between social capital and investments is similar in democratic Western European countries and Central and Eastern European countries with communist backgroun