Firm-level productivity growth returns of social capital: Evidence from Western Europe

Abstract

We analyze the firm-level labor productivity growth returns of social capital - defined as a synthetic measure of "generalized trust", "active participation", and "social norms" - using a large sample of manufacturing firms in France, Germany, Italy, Portugal, and Spain. We find that firms' labor productivity growth is higher in areas with a better social capital endowment. The positive returns of social capital are, nevertheless, unevenly distributed across firms, with smaller, less productive, less capital-endowed, and low-tech firms benefitting the most from operating in strong social capital ecosystems.