Institutional Arrangements and the Creation of Social Capital: The Effects of Public School Choice

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Abstract
While the possible decline in the level of social capital in the United States has received considerable attention by scholars such as Putnam and Fukuyama, less attention has been paid to the local activities of citizens that help define a nation's stock of social capital. Scholars have paid even less attention to how institutional arrangements affect levels of social capital. We argue that giving parents greater choice over the public schools their children attend creates incentives for parents as “citizen/consumers” to engage in activities that build social capital. Our empirical analysis employs a quasi-experimental approach comparing parental behavior in two pairs of demographically similar school districts that vary on the degree of parental choice over the schools their children attend. Our data show that, controlling for many other factors, parents who choose when given the opportunity are higher on all the indicators of social capital analyzed. Fukuyama has argued that it is easier for governments to decrease social capital than to increase it. We argue, however, that the design of government institutions can create incentives for individuals to engage in activities that increase social capital.