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Thesis (Bachelor's)

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Please use this identifier to cite or link to this item: http://hdl.handle.net/1946/24240

Title: 
  • Social Capital and the Labour Market. The extent to which differences in labour market performance can be explained by differences in social capital in European regions
Degree: 
  • Bachelor's
Abstract: 
  • In this thesis the extent to which differences in labour market performance in European regions can be traced to differences in social capital are explored. Social capital can be thought of as everything that facilitates collective or individual action, such as values and effective norms.
    The link between values, as a form of social capital and labour market outcomes, can be described using commonly used economic models since employer-employee relations are of the principal-agent kind. Thus, in a model of Shapiro and Stiglitz from 1984, the relationship between an employer and an employee is described by a principal agent problem. The employer would like a worker to work hard but the latter has an incentive to shirk his/her duties but is restrained from doing so by a combination of monitoring the risk of unemployment and other offsetting incentives, which may serve as disciplinary devices. Workers’ background – their values and attitudes towards achieving on the job to take the initiative and the values instilled in them by parents as children – will affect the utility they get from shirking their duties.
    When workers enjoy shirking their duties the employer may be forced to establish a non-shirking condition to alter their expected lifetime utility in a way that the employee is better off not shirking. The consequences of establishing the non-shirking condition are higher critical wages. By analysing a steady state equilibrium, the authors illustrated that no shirking is inconsistent with full employment, which eventually translates into involuntary unemployment. It is therefore worthwhile to examine if the level of social capital is related to the level of unemployment and which sets of values contribute to social capital.
    Using canonical-correlation analysis the findings of this study demonstrate a significant difference in social capital between European regions. Teaching children to be independent, imaginative and tolerant contributes positively to social capital as does a higher level of trust towards fellow citizens. These differences can account for differences in unemployment, male labour force participation and average hours of work across regions. In particular, regional differences in unemployment that mirror differences in social capital dwarf differences in average levels of unemployment across countries, which are the focus of most studies on unemployment.

Accepted: 
  • May 6, 2016
URI: 
  • http://hdl.handle.net/1946/24240


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