Social Capital and Unemployment: A Macro-Quantitative Analysis of the European Regions
| Published date | 01 June 2011 |
| Author | Antje Kirchner,Markus Freitag |
| DOI | 10.1111/j.1467-9248.2010.00876.x |
| Date | 01 June 2011 |
| Subject Matter | Article |
Social Capital and Unemployment:
A Macro-Quantitative Analysis of
the European Regionspost_876389..410
Markus Freitag Antje Kirchner
University of Konstanz Institute for Employment Research (IAB)
The policy of unemployment is probably one of the most controversial issues among economists, social scientists and
politicians. In this article,we argue that European regions with higher levels of social capital will tend to have lower
levels of unemployment.Using a macro-quantitative cross-sectional analysis of 134 European regions, we show that
a great deal of variability in sub-national unemployment rates can be accounted for by a particular level of regionally
aggregated measures of the density and depth of social networks between individuals.In other words, higher levelsof
social capital will lead to more efficient use of information about the labour market, to lower search and transaction
costs on both sides of the market, to a higher quality of applicants,to the efficient placement of individual workers,
to less conflict between insiders and outsiders and to more intensive efforts to find work. All in all, higher levels of
social capital can be expected to limit the numbers of unemployed. Even when applying simultaneous equation
modelling to counter against a possible endogeneity problem, our findings remain robust.
Keywords: social capital; social networks; comparative politics; European regions; sub-
national units
The policy of unemployment is probably one of the most controversial issues among
economists, social scientists and politicians – not least due to the far-reaching material and
social consequences on both individual and societal levels (Franz,2006; Hinz and Abraham,
2005; Keller, 1999). A multitude of (economic) determinants of national and regional
unemployment rates has been identified in the course of this debate. However, due to the
lack of unanimity, there is no single model of unemployment,and the controversy continues
(Bar ro, 1988; Bean, 1994; Boreham and Compston, 1992; Olson, 1982). In addition, recent
inquiries suggest that it is not sufficient to focus only on the nation state as a unit of analysis
(Armingeon, 2003; Bean, 1994; Blanchard, 2006; Johnson, 1994; Keller,1999; Korpi, 1991;
Nickell, 1997; Nickell et al., 2005). Rather, the regional dimension of unemployment has
increasingly become a focus of attention since the 1990s,especially in the European context
(Adsera and Boix, 2000; Basile and DeBenedictis, 2008; Farhauer and Granato, 2006;
Overman and Puga, 2002b, p. 119).
While economists try to explain these regional disparities by supplementing the concept of
physical capital with that of human capital, recent research in sociology and political science
has emphasised the central role of social capital in examining the situation on the labour
market. Specifically, it is argued that a large proportion of jobs are found through social
doi: 10.1111/j.1467-9248.2010.00876.x
POLITICAL STUDIES: 2011 VOL 59, 389–410
© 2011The Authors. Political Studies © 2011 Political StudiesAssociation
contacts, and that the prospect of finding employment is strongly influenced by an
individual’s social capital in the form of his or her social network (Freitag, 2000; Granovet-
ter, 1973; 1974; 1995; Halpern, 2005; Montgomery, 1991; Mouw, 2003; Preisendörfer and
Voss, 1988;Voss,2007). By drawing on the findings of these studies of social networks while
accounting for a tremendous amount of regional variability in levels of social capital
(Beugelsdijk and van Schaik, 2005; Pichler and Wallace, 2007), in this article we aim to
evaluate the causes of different levels of unemployment in the European regions from the
perspective of social capital theory.
In this respect, we argue that individuals and groups can make use of resources and are
bound by obligations that inhere in social networks (Freitag, 2006; Paxton, 1999; Portes,
1998; Svendsen and Svendsen, 2003). In other words, if‘social capital stands for the ability
of actors to secure benefits by virtue of membership in social networks or other social
structures’ (Portes, 1998,p.6), we suggest that higher levels of social capital will lead to more
efficient use of information about the labour market, to lower search and transaction costs
on both sides of the market, to a higher quality of applicants, to the efficient placement of
individual workers, to less conflict between insiders and outsiders and to more intensive
efforts to find work. All in all, higher levels of social capital can be expected to limit the
numbers of unemployed.Based on data of the European Social Survey (Norwegian Social
Science Data Service [NSD], 2007)1and the Eurostat database REGIO we support our
argument with statistical analyses comparing European sub-national units. Using a macro-
quantitative cross-sectional analysis of 134 European NUTS regions, we show that a great
deal of variability in sub-national unemployment rates can be accounted for by a particular
level of regionally aggregated measures of the density and depth of networks between
individuals.2
Our contribution goes beyond the existing literature in several respects. First,according to
Mailath and Postlewaite (2003,p.354), considering social context is crucial when evaluating
economic problems. Our article thus follows an interdisciplinary approach by using eco-
nomic as well as cultural factors to analyse regional unemployment levels.It draws on recent
developments and results in the field of regional unemployment research, providing new
insights into the functioning of regional labour markets that have been neglected (compare
Elhorst, 2003). Second, while the research field is dominated by individual and locally
limited inquiries, the number of existing studies analysing the relationship on a regional
level is fairly small and comes up with mixed findings (for overviews see Franzen and
Hangartner, 2006; Hinz and Abraham, 2005; Mouw, 2003; Voss, 2007).3However, in order
to understand fully the societal effects of social capital, it is necessary to study precisely those
aggregate effects (Newton, 2006; Putnam, 2000; Van der Meer, 2003). Third, due to this
sub-national approach (as opposed to a national one), possible methodological flaws
resulting from ‘small n’ can be diminished. Spatially uneven, the restricted distribution of
social capital and its enormous regional diversity can thus be represented more accurately
(Snyder, 2001, p. 94).
The article is structured as follows: following a presentation of the theoretical links between
social capital and unemployment, the third section is dedicated to a description of our
research design, including the methodological approach used, operationalisations and mea-
390 MARKUS FREITAG AND ANTJE KIRCHNER
© 2011The Authors. Political Studies © 2011 Political StudiesAssociation
POLITICAL STUDIES: 2011, 59(2)
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