How are social ties formed? : Interaction of neighborhood and individual immobility.

Similar documents
Labor Participation and Gender Inequality in Indonesia. Preliminary Draft DO NOT QUOTE

Nearly optimal asset allocations in retirement

KEIO/KYOTO JOINT GLOBAL CENTER OF EXCELLENCE PROGRAM Raising Market Quality-Integrated Design of Market Infrastructure

Shirking and Employment Protection Legislation: Evidence from a Natural Experiment

Chinese Firms Political Connection, Ownership, and Financing Constraints

In Debt and Approaching Retirement: Claim Social Security or Work Longer?

Public-private sector pay differential in UK: A recent update

How exogenous is exogenous income? A longitudinal study of lottery winners in the UK

Simulating Mine Revenues with Historical Gold Price Data from the Bank of England

COMMUNITY ADVANTAGE PANEL SURVEY: DATA COLLECTION UPDATE AND ANALYSIS OF PANEL ATTRITION

COMMUNITY ADVANTAGE PANEL SURVEY: DATA COLLECTION UPDATE AND ANALYSIS OF PANEL ATTRITION

Married Women s Labor Supply Decision and Husband s Work Status: The Experience of Taiwan

The Pricing of Exchange Rates in Japan: The Cases of the Japanese Automobile Industry Firms after the US Lehman Shock

Moral hazard in a voluntary deposit insurance system: Revisited

Working Papers Series

Intraday return patterns and the extension of trading hours

Ministry of Health, Labour and Welfare Statistics and Information Department

Volume Author/Editor: John F. Kain and John M. Quigley. Volume URL:

Determinants of Unemployment: Empirical Evidence from Palestine

FDI and economic growth: new evidence on the role of financial markets

1) The Effect of Recent Tax Changes on Taxable Income

COMMUNITY ADVANTAGE PANEL SURVEY: DATA COLLECTION UPDATE AND ANALYSIS OF PANEL ATTRITION

CONVERGENCES IN MEN S AND WOMEN S LIFE PATTERNS: LIFETIME WORK, LIFETIME EARNINGS, AND HUMAN CAPITAL INVESTMENT $

Kim Manturuk American Sociological Association Social Psychological Approaches to the Study of Mental Health

Capital Structure and the 2001 Recession

The Impact of Minimum Wages on Employment, Wages and Welfare: The Case of Vietnam

Estimating a Monetary Policy Rule for India

Does health capital have differential effects on economic growth?

FINANCIAL DETERMINANTS OF EQUITY SHARE PRICES: AN EMPIRICAL ANALYSIS STUDY WITH REFERENCE TO SELECTED COMPANIES LISTED ON BOMBAY STOCK EXCHANGE

Switching Monies: The Effect of the Euro on Trade between Belgium and Luxembourg* Volker Nitsch. ETH Zürich and Freie Universität Berlin

Renters Report Future Home Buying Optimism, While Family Financial Assistance Is Most Available to Populations with Higher Homeownership Rates

Online Appendix for Does mobile money affect saving behavior? Evidence from a developing country Journal of African Economies


DECOMPOSING THE EFFECT OF HEIGHT ON INCOME IN CHINA: THE ROLE OF MARKET AND POLITICAL CHANNELS

Monetary Policy Implications of Electronic Currency: An Empirical Analysis. Christopher Fogelstrom. Ann L. Owen* Hamilton College.

Jamie Wagner Ph.D. Student University of Nebraska Lincoln

UNINTENDED CONSEQUENCES OF A GRANT REFORM: HOW THE ACTION PLAN FOR THE ELDERLY AFFECTED THE BUDGET DEFICIT AND SERVICES FOR THE YOUNG

Balance of payments and policies that affects its positioning in Nigeria

Fiscal sustainability: a note for Cabo Verde

Effect of Firm Age in Expected Loss Estimation for Small Sized Firms

Determinants of demand for life insurance in European countries

Thierry Kangoye and Zuzana Brixiová 1. March 2013

Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As

Retirement Withdrawal Rates and Portfolio Success Rates: What Can the Historical Record Teach Us?

Financial Literacy and Financial Inclusion: A Case Study of Punjab

Julio Videras Department of Economics Hamilton College

IMPACT OF BANK SIZE ON PROFITABILITY: EVIDANCE FROM PAKISTAN

Fannie Mae Own-Rent Analysis Theme 1: Persistence of the Homeownership Aspiration

A SEEMINGLY UNRELATED REGRESSION ANALYSIS ON THE TRADING BEHAVIOR OF MUTUAL FUND INVESTORS

Could regulator materialize potential demand for Islamic securities? Evidence from Indonesia

There is poverty convergence

What Makes Family Members Live Apart or Together?: An Empirical Study with Japanese Panel Study of Consumers

Managerial compensation and the threat of takeover

Effect of Firm Age in Credit Scoring Model for Small Sized Firms

Value Relevance of Profit Available for Dividend

The Time Cost of Documents to Trade

Sam Bucovetsky und Andreas Haufler: Preferential tax regimes with asymmetric countries

Employment and Income Generation in Informal Sector: A Case of Street Vendors of Kathmandu Nepal

ESTIMATING THE RISK PREMIUM OF LAW ENFORCEMENT OFFICERS. Brandon Payne East Carolina University Department of Economics Thesis Paper November 27, 2002

Journal of Internet Banking and Commerce

How Markets React to Different Types of Mergers

Appendix A. Additional Results

Maximin and minimax strategies in asymmetric duopoly: Cournot and Bertrand

Unemployment, Income Growth and Social Security

Bank Switching and Interest Rates: Examining Annual Transfers Between Savings Accounts

Accounting disclosure, value relevance and firm life cycle: Evidence from Iran

Impact of the domestic and the US macroeconomic news on the Romanian stock market

AN ANALYSIS OF THE DEGREE OF DIVERSIFICATION AND FIRM PERFORMANCE Zheng-Feng Guo, Vanderbilt University Lingyan Cao, University of Maryland

Switching Costs and the foreign Firm s Entry

Wage Gap Estimation with Proxies and Nonresponse

Unemployment, tax evasion and the slippery slope framework

Does Homeownership Promote Wealth Accumulation? *

A STUDY ON FACTORS INFLUENCING OF WOMEN POLICYHOLDER S INVESTMENT DECISION TOWARDS LIFE INSURANCE CORPORATION OF INDIA POLICIES IN CHENNAI

DYNAMICS OF URBAN INFORMAL

Economic Freedom and Government Efficiency: Recent Evidence from China

Stock price synchronicity and the role of analyst: Do analysts generate firm-specific vs. market-wide information?

Financial liberalization and the relationship-specificity of exports *

The Debt-Equity Choice of Japanese Firms

Financial Risk Tolerance and the influence of Socio-demographic Characteristics of Retail Investors

Neighborhood Externality Risk and The Homeownership Status of Properties

Determining Factors in Middle-Aged and Older Persons Participation in Volunteer Activity and Willingness to Participate

Growth with Time Zone Differences

Relationship between Consumer Price Index (CPI) and Government Bonds

The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting

Return to schooling in Vietnam during economic transition: Does return to schooling in Vietnam reach its peak?

DIVIDEND POLICY AND THE LIFE CYCLE HYPOTHESIS: EVIDENCE FROM TAIWAN

Beta estimates for leveraged ETF

ONLINE APPENDIX (NOT FOR PUBLICATION) Appendix A: Appendix Figures and Tables

Capital allocation in Indian business groups

A Note on the Solow Growth Model with a CES Production Function and Declining Population

Internet Appendix to Broad-based Employee Stock Ownership: Motives and Outcomes *

Market Overreaction to Bad News and Title Repurchase: Evidence from Japan.

EFFECT OF GENERAL UNCERTAINTY ON EARLY AND LATE VENTURE- CAPITAL INVESTMENTS: A CROSS-COUNTRY STUDY. Rajeev K. Goel* Illinois State University

Financial Development and Economic Growth at Different Income Levels

Financial Literacy in Urban India: A Case Study of Bohra Community in Mumbai

Use of Imported Inputs and the Cost of Importing

Life Insurance and Euro Zone s Economic Growth

International Income Smoothing and Foreign Asset Holdings.

ECO671, Spring 2014, Sample Questions for First Exam

THE EFFECT OF DEMOGRAPHIC AND SOCIOECONOMIC FACTORS ON HOUSEHOLDS INDEBTEDNESS* Luísa Farinha** Percentage

Transcription:

MPRA Munich Personal RePEc Archive How are social ties formed? : Interaction of neighborhood and individual immobility. Eiji Yamamura 9. May 2009 Online at http://mpra.ub.uni-muenchen.de/15124/ MPRA Paper No. 15124, posted 9. May 2009 16:12 UTC

How are social ties formed? : Interaction of neighborhood and individual immobility. Eiji Yamamura Department of Economics, Seinan Gakuin University, 6-2-92 Nishijin, Sawara-ku, Fukuoka 814-8511, Japan Abstract Using individual data from Japan, this paper investigates how a neighbor s immobility is associated with individual investment in social capital. It is found that local homeownership has a positive effect on individual investment and that this effect for individual homeowners is about 2.5 times larger than for renters. Keywords: Social Capital, homeownership, length of residence. JEL classification: D71, R11, R23. Tel: 81-92-823-4543, Fax: 81-92-823-2506 E-mail address: yamaei@seinan-gu.ac.jp 0

1. Introduction Since the seminal work of Putnam (2000), social capital has been regarded as an influential social science concept, with the formation of social capital being a major issue for researchers. From an economics viewpoint, it is critical to analyze what gives individuals an incentive to invest in social capital (Glaeser et al. 2002). For instance, empirical works explore how social capital is accumulated based on individual decision making, indicating that a homeowner is more likely to invest in social capital because of the lower mobility rates of homeowners (DiPasquale and Glaeser 1999; Hilber 2007). On the other hand, it has been found that a householder's social ties with neighbors, which can be regarded as a kind of social capital, generate benefit for residents (Putnam 2000). This household member cannot enjoy this benefit if the household leaves and begins residence in another place. As a consequence, local social ties lead to low residential mobility (Kan 2007). This indicates that individual decision making about investment in social capital is affected by the circumstances of where one resides 1. Both individual features and neighbor characteristics are thought to be crucial determinants of individual investment in social capital. Moreover, assuming that the relationships among individuals and neighbors have a crucial role, the neighbor s effect appears to vary according to individual characteristics. Thus it is important to examine the interaction effect between individual s and neighbor s characteristics. However, to date few researchers have attempted to do this. This paper uses individual level data from Japan to investigate how the neighbor s immobility effect on individual investment in social capital differs between homeowners and renters. 1 It is found that people are less likely to cooperate to resolve collective action problems in more heterogeneous communities (Alesina & La Ferrara, 2000). 1

2. Data and Methods The individual level data used in this paper covers information such as social capital index, years of living at the current address, homeownership, household income, marital and demographic (age and sex) status 2. This data was constructed from the Social Policy and Social Consciousness (SPSC) survey conducted in all parts of Japan in 2000. The survey collected data on 3991 adults 3. Sample points are divided into 11 areas. In each area, according to their population size, cities and towns are divided into 4 groups such as the 13 metropolitan cities, cities with 200 000 people or greater, cities with 100 000 people or greater, and towns and villages. Therefore, 4 population groups exist within each of the 11 areas. Hence, area-population groups can be divided into 44, which are defined as local groups in this paper. As shown later, variables to capture neighbor s characteristics are calculated in accord with these local groupings. According to Putnam (2000), the degree of civic engagement is considered as investment for social capital in this research. Thus social capital is measured using the question Are you actively involved in the activity of a neighborhood association? Responses run from 0 (not at all) to 3 ( Yes, actively involved ), which are used as the dependent variable. I can see from Figure1 that at an average local level, investment in social capital is positively related to average homeowner rates; which is consistent with existing reports (DiPasquale and Glaeser 1999; Hilber 2007). For a closer examination, I explore how local circumstances of individuals, captured by neighbor s homeownership and length of residence, are related to individuals investment in social capital. 2 The data for this secondary analysis, "Social Policy and Social Consciousness survey (SPSC), Shogo Takekawa," was provided by the Social Science Japan Data Archive, Information Center for Social Science Research on Japan, Institute of Social Science, The University of Tokyo. 3 Respondents did not respond to all questions and therefore 3075 samples were used for regression estimations. 2

Variables used for the regression estimations are shown in Table 1; these include variable definitions and mean values of all samples, as well as those of split samples such as homeowners and renters. Homeownership is measured using the question What is your type of residence?. The responses were I own my home, I reside in a home owned by a parent and others. I defined homeownership as being in a home owned by individuals or their parents. The local group average value, AVHOME, is incorporated as one of the independent variables. Furthermore, with a view to capture the effect of the length of residence, I include AVLIVE 20 representing te local average rates of persons who have lived at their current address for longer than 20 years. AVHOME and AVLIVE20 are thought to capture the degree of population immobility in a particular locality. The view of Kan (2007) is that people integrated into neighbor ties are thought to be inclined to invest in social capital since the return on investment is expected to be sufficiently large. This seems to hold under conditions in which the individual s barrier to moving is high and ties with neighbors are strong. Individual barriers to moving are captured by individual homeownership (DiPasquale and Glaeser 1999), while ties with neighbors can be achieved from AVHOME and AVLIVE20. Therefore, AVHOME and AVLIVE20 are predicted to take positive signs and their coefficients should become larger when individuals are homeowners. Therefore, when estimations are conducted I split samples into homeowners and renters. However, individuals who tend to invest in social capital appeared to become homeowners, resulting in selection bias. Therefore, to control for this bias, I also conducted Heckman s sample selection estimation. In the first stage of Heckman s estimation, I used the same variables used in the second stage 3

estimation, area dummies and metropolitan cities dummy as independent variables 4. It seems appropriate to argue that that area dummies and city size capture the local housing market condition, leading me to assume that they are exogenous for an individual s decision on homeownership. Following the model used by DiPasquale and Glaeser (1999), other independent variables, such as marital status, demographic character, education, and household s income are included in the estimation function. 3. Estimation Results Table2 sets out the estimation results. Column (1) shows the results using all samples. For the purpose of comparing the effect on homeowners with that on renters, Columns (2) and (3) present results of homeowner and renter samples, respectively. Column (4) provides the results of Heckman s estimation. I now restricted the results of AVHOME and AVLIVE 20 to examine the argument as above. In all estimations of AVHOME and AVLIVE20, as anticipated, all coefficient signs are positive. As for all estimation results of the samples in column (1), both of AVHOME and AVLIVE20 are statistically significant. It is interesting to observe that the value of AVHOME in column (2), 0.90, is approximately 3 times larger than that in column (3), 0.34. Also, the value of AVLIVE20 in column (2), 0.50, is about 10 times larger than that in column (3), 0.05. Furthermore, AVHOME and AVLIVE20 are statistically significant in column (2), whereas they are insignificant in column (3). It follows from this that neighbor s immobility has a greater effect on homeowners than on renters. Heckman s estimation results are shown in column (4); revealing that after controlling for a 4 There were 13 metropolitan cities in Japan when the survey was conducted. 4

selection bias, the results of AVHOME and AVLIVE20 do not change indicating that the estimation results are robust 5. What comes out of the findings above strongly supports the view that the relationship between a neighbor s barriers and an individual s ones can be considered complementary. 4. Conclusion The major findings of this analysis, which was based on the individual data, are as follows; Neighbor immobility significantly enhances individual investment of homeowners in social capital, whereas this neighbor effect on renters is not only smaller but also statistically insignificant when samples are restricted to renters. From this I derived the argument that the neighbor immobility effect is increased by an individual s homeownership, and hence interaction between circumstances and an individual s characteristics has a critical role in social capital formation. Thus, I stress the importance of simultaneously considering circumstances and individual characteristics when analyzing incentives to invest in social capital. 5 In the first stage estimation, a dummy variable for metropolitan cities yielded a significant negative sign, implying that individuals are less likely to own a home in metropolitan cities. This might be because of the high cost of homes in densely populated metropolitan cities.. 5

References Alesina, A, and E. LaFerrara, 2000, Participation in heterogeneous communities. Quarterly Journal of Economics 115(3), 847-904. DiPasquale, D. and E.L. Glaeser,.1999, Incentives and social capital: Are homeowners better citizens?. Journal of Urban Economics 45(2), 354-384. Glaeser, EL, D. Laibson, and B. Sacerdote, 2002, An economic approach to social capital. Economic Journal 112, 437-458. Hilber, C.A.L, 2007, New housing supply and the dilution of social capital. MPRA Paper 5134, (University Library of Munich, Germany). Kan, K, 2007, Residential mobility and social capital. Journal of Urban Economics 61(3), 436-457. Putnam, RD., 2000, Bowling alone: The collapse and revival of American community. (A Touchstone Book: New York). 6

Table 1 Variable definitions and descriptive statistics Variables Definition Full Owners Renters sample SC Degree of involvement in the activities of a 1.40 1.51 1.06 neighborhood association from 0 (not at all) to 3 (actively involved). AVHOME Local average rates of homeownership 0.76 0.77 0.70 AVLIVE20 Local average rates of persons who have lived at their 0.61 0.62 0.58 current address for longer than 20 years CHILD 1 if the person has child, otherwise 0. 0.81 0.84 0.70 MARRI 1 if the person has a spouse, otherwise 0. 0.79 0.82 0.70 DIV 1 if the person has been divorced, otherwise 0. 0.03 0.01 0.07 AGE Ages 50 52 43 UNIV 1 if the person graduated from a university, otherwise 0.16 0.16 0.15 0. MALE 1 if male, otherwise 0. 0.49 0.50 0.46 INCOME Household income a 0.65 0.69 0.49 Samples 3075 2349 726 Note: a in 10 Million yen increments 7

Table 2 Determinants of investment for social capital. Variables (1) OLS All samples AVHOME 0.97** (5.08) AVLIVE20 0.47* (2.15) CHILD 0.32** (5.83) MARRI 0.16** (3.14) DIV -0.15 (-1.51) AGE 0.01** (9.32) UNIV -0.09* (-2.06) MALE -0.004 (-0.14) INCOME 0.02 (2) OLS Homeowner 0.90** (3.93) 0.49* (1.92) 0.29** (4.34) 0.16** (2.62) -0.16 (-1.16) 0.01** (7.42) -0.10* (-1.95) -0.003 (-0.09) -0.009 (3) OLS Renter 0.34 (0.92) 0.05 (0.13) 0.32** (3.54) 0.20* (2.05) -0.009 (-0.07) 0.006** (2.73) -0.09 (-0.96) -0.008 (-0.13) 0.13 (4) HECKMAN 0.85** (2.68) 0.48* (1.84) 0.29** (4.17) 0.17** (2.63) -0.14 (-0.87) 0.01** (4.36) -0.10* (-1.96) -0.003 (-0.09) -0.001 (-0.19) (0.73) (-0.02) (-1.25) Adj R- square 0.12 0.10 0.07 Wald chi- square 574 Sample size 3075 2349 726 3075 Uncensored sample 2349 Notes: Numbers in parentheses are t-statistics. * and ** indicate significance at 5 and 1 per cent levels respectively (one-sided tests). A constant term is included when an estimation was conducted but its result is not reported to save space. 8

1 social capital 1.5 2.4.6.8 1 homeowner Fig.1. Local average social capital investments and local average homeowner rates 9