Does it Pay Off to be trusting in Romania? Social Capital Effects on Income Distribution

The idea that sustains the concept of social capital is reflected in the truism that economic activities requiring some agents to rely on the future actions of others are to be pulled off at lower cost in higher-trust environments. As such, higher-trust societies are characterized by allocating less resource for safeguarding individuals against being mistrusted in economic transactions. There is extended research literature that deals with the determinants of economic growth between countries and regions. The purpose of this paper is to strengthen the social capital literature, especially in the case of Romania where little research has been done in this domain. Using the World Values Survey database the paper provides a descriptive image on five dimensions of social capital as defined by the World Bank. Further, a correlation analysis is carried out for identifying which dimensions of social capital interact the most with the income variable of Romanian respondents. The results show that Romanians who engage in voluntary organization, who exhibit high degrees of generalized trust and who have a high degree of confidence in institutions tend to be placed in the higher income decile. Also, a higher placement in the income decline is characteristic to Romanians who use more than one source of information and communication.