Chapter 7: Social capital and the economics of cities
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Social capital has often been conceived of as a set of theories more apt for the analysis of rural areas than for metropolitan cities. Yet cities are teeming with interaction and other network phenomena, analyzed in the urban economics literature on social interactions. In this chapter, we bridge these strands of theories by emphasizing link directness (depth of connections) and link thickness (frequency of interaction) as key characteristics for the analysis of social capital in urban and rural settings alike. We demonstrate how social capital and ‘network-of-network’ effects of thin links (abundant in cities) can strongly mimic effects of agglomeration economies. Our framework maintains that previous emphases on isolating the effects of agglomeration effects on economic outcomes should be complemented by an understanding of how effects of social capital pertain, for example, to attitudes to entrepreneurship and industriousness. We suggest that these effects may be understood through the following mechanisms: Peer effects and Learning, and Imitation and Emulation.

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