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JUNE 6
IPD/JICA TASKFORCE MEETING DEAD SEA, JORDAN
GO SHIMADA
Social Capital and Industrial Development – Inside the black
box1
Knack and Keefer (1997)
What we know from their findings Trust and civic cooperation
are associated with stronger economic performance.
Associational activity is not correlated with economic performance.
Trust and norms of civic cooperation are stronger in countries in countries with formal institutions that effectively protect property and contract rights.
La Porta et al (1997) also argued in the same line.
2
Inside the black box
However, it is not clear how social capital improves outcomes.
A number of studies found that social capital foster innovation, by which social capital influences per capita economic growth (e.g. Akcomak and Weel 2009 on 102 European Region in the period 1990-2002 ) . Policy implications: public investment in R&D might not work efficiently to improve backward regions fast without social capital.
Bloom et al (2012) on social capital and decentralization.
3
4
Working Practice (micro innovation)
Innovation and Technological Know-how
• Quality as the key driver.• Working Practices as the foundation of quality
Level of Sophistication(Modified by this author based on John Sutton 2013)
Social Capital for Industrial Development
Linking
Bridging
Bonding
• Btw Institutions -Industry/Clusters (Linking) : assist to promote learning (management and technological skill)
• Within industry/cluster and btw firms along the value chain (Bridging) : benefit of external economies to learn, to innovate and to build capabilities
• Within firms (Bonding): (Organizational change to increase productivity): Work team, off-line activities, flattering of hierarchies, employer and employee relations) (ILO 1998)
innovation, productivity and quality control
5
Management capital as a part of social capital
System making stage
System working
stage
System management
stage
6
World Value Survey (WVS)
WVS 2010-2014 contains survey data on respondents' answer on 265 items from 76817 people in 52 countries.
Most empirical studies, such as Knack and Keefer (1997), use this survey.
Trust question: “Generally speaking, would you say that most people can be trusted, or that you can’t be too careful in dealing with people?”
In this study, the trust index uses the percentage of respondents in each nations replying “most people can be trusted”, deleting the ‘don’t know’ responses.
Obs: 8610 Mean: 1.697909 SD: 0.459191
7
Armenia
Australia
Azerbaijan
Chile
ChinaColombia
EcuadorEgyptEstonia
Germany
India
Japan
Jordan Kazakhstan
Korea, Republic of
MalaysiaMexico
Morocco
Netherlands
PakistanPeruPhilippines
PolandRomania
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
United States
050
000
1000
0015
0000
Val
ue a
dded
per
wo
rke
r in
20
10
0 20 40 60 80Trust (%)
Value added per worker (2005 dollars per year) Fitted values
(Source: Shimada 2014)
Trust and value added per worker
Data: WVS 2010-2014 and WDR 2013 (2005 dollars per year)
8
Algeria
Chile
China
Colombia
Cyprus
Ecuador
Egypt
GhanaIndia
Japan
Jordan
Korea, Republic ofMalaysia Mexico
Morocco
Netherlands
Nigeria
PakistanPeruPhilippines
Rwanda
SingaporeSpain SwedenTrinidad and Tobago
Tunisia
Turkey
United States
Uruguay
Zimbabwe
0.5
11.
5T
FP
(re
lativ
e to
the
US
)
0 20 40 60 80Trust (%)
Fitted values TFP
(Souce: Shimada 2014) (Data: WVS 2010-1014, UNIDO2014)
Trust and TFP
9
Armenia
Australia
Azerbaijan
Chile
ChinaColombia
Ecuador Estonia
Germany
India
JapanJordan
Kazakhstan
MalaysiaMexico
Morocco
Netherlands
Pakistan
Peru
PhilippinesPoland
Romania Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine05
0,00
01
00,0
001
50,0
00V
alu
e ad
ded
per
wor
ker
(Pri
mar
y se
cto
r)
0 20 40 60 80Trust (%)
95% CI Fitted values
Primary
(Souce: Shimada 2014) (Data: WVS 2010-1014, WDR2013 2005 dollar per year)
Trust and value added in primary sector
Armenia
Australia
AzerbaijanChile
ChinaColombia
EcuadorEstonia
Germany
India
Japan
Jordan KazakhstanMalaysia MexicoMorocco
Netherlands
PakistanPeruPhilippines
PolandRomania
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
TurkeyUkraine
01
00,0
00
200
,00
03
00,0
00
Va
lue
adde
d pe
r w
orke
r (s
eco
nd
ary
se
cto
r)
0 20 40 60 80Trust (%)
95% CI Fitted valuessecondary
(Souce: Shimada 2014)
(Data: WVS 2010-1014, WDR2013 2005 dollar per year)
Trust and value added in secondary sector
Armenia
Australia
Azerbaijan
Chile
ChinaColombia
EcuadorEstonia
Germany
India
Japan
Jordan KazakhstanMalaysia
Mexico
Morocco
Netherlands
PakistanPeruPhilippines
PolandRomania
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
05
0,00
01
00,0
001
50,0
00V
alu
e ad
ded
per
wor
ker
(ter
iary
se
ctor
)
0 20 40 60 80Trust (%)
95% CI Fitted valuesTertiary
(Souce: Shimada 2014) (Data: WVS 2010-1014, WDR2013 2005 dollar per year)
Trust and value added in teriary sector
model1 model2
Dependent variable Value addedper worker TFP
trust 1082.3539 0.0055
[4.21]*** [2.33]**gini_index -361.786 -0.0037
[-0.58] [-0.69]
_cons 16404.472 0.4557
[0.61] [1.76]*N 32 28
R-squared 0.4419 0.307Adj-R-squared 0.4034 0.2516
* p<0.1, ** p<0.05, *** p<0.01
10
Algeria
Armenia
Australia
Azerbaijan
Belarus
Chile
China
Colombia
Cyprus
Ecuador
Egypt
Estonia
Germany
Ghana
India
Iraq
Japan
Jordan
KazakhstanKorea, Republic of
Kyrgyzstan
Lebanon LibyaMalaysia
Mexico
Morocco
Netherlands
NigeriaPakistanPalestine
PeruPhilippines
Poland
Romania
Russia
Rwanda
Singapore
Slovenia
Spain
Sweden
Taiwan
Trinidad and Tobago
Tunisia
Turkey
Ukraine
United States
Uruguay
Uzbekistan
Yemen
Zimbabwe
020
4060
80T
rust
60 70 80 90 100Family trust
(Source: Shimada 2014) (Data: WVS 2010-1014)
Family trust and general trust
Answer type:1.Trust completely2.Trust somewhat3.Do not trust very much4.Do not trust at all
In this analysis, only “trust completely” is used.
Family trust = Number of respondent who answered “rust completely”/Number of all respondent
11
Negative correlation between family trust and value added
Armenia
Australia
Azerbaijan
Chile
ChinaColombia
Ecuador EgyptEstonia
Germany
India
Japan
JordanKazakhstan
Korea, Republic of
MalaysiaMexico
Morocco
Netherlands
PakistanPeru Philippines
PolandRomania
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
United States
050
000
1000
0015
0000
Val
ue a
dded
per
wo
rke
r in
20
10
60 70 80 90 100Family trust (%)
Value added per worker (2005 dollars per year) Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014, WDR 2013 (2005 dollars per year))
Family trust and value added per worker
Algeria
Chile
China
Colombia
Cyprus
Ecuador
Egypt
GhanaIndia
Japan
Jordan
Korea, Republic ofMalaysiaMexico
Morocco
Netherlands
Nigeria
PakistanPeru Philippines
Rwanda
Singapore SpainSwedenTrinidad and Tobago
TunisiaTurkey
United States
Uruguay
Zimbabwe
0.5
11.
5T
FP
60 70 80 90 100Family trust
TFP Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014 UNIDO 2014)
Family trust and TFP
model3 model4
Dependent variable Value addedper worker TFP
trust_family -1749.146 -0.0052
[-2.75]** [-1.12]gini_index -1382.74 -0.0114
[-2.11]** [-2.32]**
_cons 231679.07 1.3368
[3.87]*** [2.92]***N 32 28
R-squared 0.2868 0.1966Adj-R-squared 0.2376 0.1323
* p<0.1, ** p<0.05, *** p<0.01
12
If family trust is high, but general trust is not high, then….
Armenia
Australia
Azerbaijan
Chile
ChinaColombia
Ecuador EgyptEstonia
Germany
India
Japan
JordanKazakhstan
Korea, Republic of
MalaysiaMexico
Morocco
Netherlands
PakistanPeru Philippines
PolandRomania
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
United States
050
000
1000
0015
0000
Val
ue a
dded
per
wo
rke
r in
20
10
20 40 60 80 100Family bonding (%)
Value added per worker (2005 dollars per year) Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014)
Family bonding and value added per worker
Algeria
Chile
China
Colombia
Cyprus
Ecuador
Egypt
GhanaIndia
Japan
Jordan
Korea, Republic of MalaysiaMexico
Morocco
Netherlands
Nigeria
PakistanPeru Philippines
Rwanda
Singapore SpainSwedenTrinidad and Tobago
TunisiaTurkey
United States
Uruguay
Zimbabwe
0.5
11.
5T
FP
20 40 60 80 100Family_bonding
TFP Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014 UNIDO 2014)
Family bonding and TFP
model5 model6
Dependent variable Value addedper worker TFP
Family_bonding -1168.788 -0.0049
[-4.63]*** [-2.07]**gini_index -539.3578 -0.0064
[-0.93] [-1.27]
_cons 124956.18 1.0103
[5.44]*** [5.03]***N 32 28
R-squared 0.4827 0.2798Adj-R-squared 0.447 0.2222
* p<0.1, ** p<0.05, *** p<0.01
13
Armenia
Australia
Azerbaijan
Chile
China
ColombiaEcuador Egypt
Germany
India
Japan
Jordan Kazakhstan
Korea, Republic of
MalaysiaMexico
Morocco
Netherlands
PakistanPeru
Philippines
Poland
Romania Russia
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
United States
050
000
1000
0015
0000
Val
ue a
dded
per
wo
rke
r
0 20 40 60 80 100Confidence in civil service
(Source: Shimada 2014) (Data: WVS 2010-1014 UNIDO 2014)
Confidence in civil service and value added per worker
Armenia
Australia
Azerbaijan
Chile
China
ColombiaEcuadorEgypt
Estonia
Germany
India
Japan
Jordan Kazakhstan
Korea, Republic of
MalaysiaMexico
Morocco
Netherlands
PakistanPeru
Philippines
Poland
Romania Russia
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Turkey
Ukraine
United States
050
000
1000
0015
0000
Val
ue a
dded
per
wo
rke
r
0 20 40 60 80 100Confidence in government
(Source: Shimada 2014) (Data: WVS 2010-1014 UNIDO 2014)
Confidence in govenment and value added per worker
model7 model8 model9 mode10
Dependent variable Value addedper worker TFP
Value addedper worker TFP
civiv_confidence 33.1856 -0.0018
[0.10] [-0.80]govenment_confidence -254.8138 -0.0015
[-0.86] [-0.63]gini_index -1331.713 -0.0114 -1223.751 -0.0108
[-1.80]* [-2.34]** [-1.66] [-2.19]**
_cons 81409.001 0.9979 89486.505 0.9564
[2.49]** [4.26]*** [3.11]*** [4.35]***N 31 29 32 29
R-squared 0.1059 0.1847 0.1231 0.1772Adj-R-squared 0.042 0.122 0.0627 0.1139
* p<0.1, ** p<0.05, *** p<0.01
AlgeriaArmenia
Australia
Azerbaijan
Belarus
Chile
China
Colombia
CyprusEcuador
Egypt Germany
Ghana
India
Iraq
Japan
Jordan
Kazakhstan
Korea, Republic of
Kyrgyzstan
Lebanon Libya
Malaysia
Mexico
Morocco
Netherlands
New Zealand
NigeriaPakistanPalestine
Peru
Philippines
PolandRomania
Russia
Rwanda
Singapore
Slovenia
Spain
Sweden
Taiwan
Trinidad and Tobago
Tunisia
Turkey
Ukraine
United States
Uruguay
Uzbekistan
Yemen
Zimbabwe
020
4060
8010
0C
onf
iden
ce in
gov
ern
men
t
0 20 40 60 80 100Confidence in civil service
(Source: Shimada 2014) (Data: WVS 2010-1014)
Confidence in civil service and government
14
Algeria
Armenia
Australia
Azerbaijan
Belarus
Chile
China
ColombiaEcuador
Egypt
Estonia
Germany
Ghana
India
Iraq
Japan
Jordan
KazakhstanKorea, Republic of
Malaysia
Mexico
Morocco
Netherlands
NigeriaPakistan
PeruPhilippines
Poland
Romania
Russia
Rwanda
Singapore
Slovenia
Spain
Sweden
Tunisia
Turkey
Ukraine
United States
Uruguay
Uzbekistan
Yemen
Zimbabwe
020
4060
80T
rust
20 30 40 50 60 70gini
Trust Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014 WDI 2014)
Trust and Gini
Algeria
Armenia
Australia
Azerbaijan
Belarus
Chile
China
Colombia
Cyprus
Ecuador
Egypt
Estonia
Germany
Ghana
India
Iraq
Japan
Jordan
KazakhstanKorea, Republic of
LebanonMalaysia
Mexico
Morocco
Netherlands
NigeriaPakistan
PeruPhilippines
Poland
Romania
Russia
Rwanda
Singapore
Slovenia
Spain
Sweden
Trinidad and Tobago
Tunisia
Turkey
Ukraine
United States
Uruguay
Uzbekistan
Yemen
Zimbabwe
020
4060
80T
rust
0 50000 100000 150000GDP per capita
Trust Fitted values
(Source: Shimada 2014) (Data: WVS 2010-1014 WDI 2014)
Trust and GDP per capita
Model11 Model112
Dependent variable Trust Family bonding
gini_index -0.5136 0.1864
[-1.77]* [0.71]Per_capita_GDP 0.0006 -0.0007
[4.24]*** [-4.92]***_cons 38.2791 63.7695
[3.21]*** [5.91]***
N 43 43
R-squared 0.415 0.425Adj-R-squared 0.3857 0.3963
* p<0.1, ** p<0.05, *** p<0.01
15
Way forwards
Knack and Keefer (1997) found positive correlation between social capital and economic growth, but the mechanism remains as black box.
Some literature found social capital promotes innovation, but not productivity.
This quick study found that social capital has positive impacts on TFP and value added per worker. However, more in depth study is needed.
I started collecting data from 120 private companies in Central America (Costa Rica, Panama, El Salvador, Honduras, Nicaragua, Guatemala, Dominica, Belize)
I will start collecting data from Kenyan Horticultural producing association (household N = 6,000).
Based on these micro data, more in depth analysis will be done.
16
Major Reference
Akçomak, I. Semih, and Bas Ter Weel. "Social capital, innovation and growth: Evidence from Europe." European Economic Review 53.5 (2009): 544-567.
Barr, Abigail M. "Enterprise Performance and the Functional Diversity of Social Capital." (1998).
Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. "The Organization of Firms Across Countries*." The quarterly journal of economics 127.4 (2012): 1663-1705.
Knack, Stephen, and Philip Keefer. "Does social capital have an economic payoff? A cross-country investigation." The Quarterly journal of economics112.4 (1997): 1251-1288.
Porta, Rafael La, et al. Trust in large organizations. No. w5864. National Bureau of Economic Research, 1996.
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