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Abstract

Social capital is often seen as an important factor in economic development, but its definition, measurement, and transmission mechanism are still debated in the literature. This study aims to highlight the importance of contextualizing social capital in economic analysis by emphasizing conceptual and methodological challenges in cross-border studies. Keefer and Knack's (1997) framework of thought was used with limited modifications, and was enriched by the mechanism-based approach of Fukuyama and Torsvik. Empirically, this study uses cross-sectional data from 2018 from twelve member countries of the Organization of Islamic Cooperation (OIC). The level of trust is used as a proxy for social capital, with education as a control variable. The results of the estimation show that the relationship between social capital and aggregate economic performance is not statistically significant and tends to be in the opposite direction to the theoretical predictions. These findings are interpreted as an illustration of the limitations of aggregate measurement and the ambiguity of mechanisms when social and institutional contexts are ignored. This study confirms that the identification of context and mechanisms is an important prerequisite in social capital analysis.

Keywords

Social capital; trusts; mechanisms; contexts; economic development

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