The monetary value of social capital

•We examine the monetary value of social capital in its multidimensional form.•EVS data from 45 European countries are used for the empirical analysis.•Shadow prices of social capital are estimated based on a well-being function.•Social capital has significant monetary value to individuals.•A one SD increase in institutional trust is worth on average € 7405 per year in terms of foregone income.

The purpose of this study is to estimate the monetary value of social capital by considering its multidimensional nature. Four dimensions are conceptualized: Interpersonal trust, institutional trust, trustworthiness, and participation in civil society (formal and informal). The monetary value is obtained by including social capital in a well-being function and estimating the shadow price of social capital. The empirical analysis is based on data from the European Values Survey covering 45 European countries. A generalized ordered response model is estimated to account for possible heterogeneity of social capital indicators among the ten different subjective well-being levels. The results show that on average a one standard deviation increase in interpersonal trust (people's fairness) is worth an extra € 7913 per year in terms of foregone income, the same increase in institutional trust is worth € 7405, and the same increase in the importance of family is worth € 7312. The findings indicate that social capital has significant monetary value to individuals. This should be considered when designing government policies aiming at, e.g., labor market mobility that are accompanied by a decreasing social capital stock that, in turn, may negatively affect economic and political development.