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The Impact of Bridging and Bonding Social Capital on Individual Earnings: Evidence for an Inverted U

Based on data on a cross section of individuals surveyed in the 1999-2002 wave of World and European Values Surveys, we investigate the extent to which bridging and bonding social capital as well as social trust interdependently affect individuals’ earnings. Our analysis provides robust evidence that the impact of bridging social capital on earnings is inverted-U shaped whereas the impact of bonding social capital is unambiguously negative and approximately linear. It is carefully ascertained that neither of these results is driven by regressor endogeneity or omitted variables bias. We also identify significant interaction effects between social capital, trust, and employment status.