Social capital and the distribution of household income in the United States: 1980, 1990, and 2000

Social capital is a person or group's sympathy or sense of obligation for another person or group. The objects of sympathetic feelings have social capital. Those holding sympathetic feelings for others provide social capital. Because social capital providers internalize the consequences of their choices on the objects of their social capital, they trade with each other on different terms and at different levels than would occur in arm's length transactions, all other things equal. Furthermore, changes in the distribution of social capital alter the terms and level of trade which in turn alter the distribution of income. This paper demonstrates mathematically the connection between changes in social capital and income distributions and then tests empirically the influence of social capital on household income distributions in the 50 U.S. states for the census years 1980, 1990, and 2000. The mathematical and empirical findings of this paper support the proposition that social capital measured by social capital indicator variables have important influences on the distribution of household incomes. (C) 2011 Elsevier Inc. All rights reserved.