Social capital formation : some theory and experimental evidence

Abstract

We use a rule-based decision model to study social capital formation and economic performance, where the agents are sometimes motivated by norms and sometimes by pure self-interest. In this framework, the normative concepts of trust, cooperation and reciprocity have natural counterparts in terms of observable behavior, which allows us to disentangle the interaction between them and form hypotheses that can be tested on experimental data. We apply the model to data from experiments with a gift exchange game in Norway and the Netherlands, and find that observed differences in trust and cooperation between the two subject groups are accounted for by differences in reciprocity. This indicates that reciprocity may be a key to understanding social capital formation and its effect on economic performance.