Essays on social capital and human capital

Social trust, cooperation, and human capital. The importance of social trust on economic growth has been suggested by many empirical works. This essay formalizes the concept of social trust and studies its formation process in a game theoretic setting. It provides plausible explanations for a wide range of empirical and experimental findings. The main results of the essay are as follows. Social trust induces cooperation even in one-period prisoner\u27s dilemmas. Fixing a game, the amount of social trust is determined by the distribution of players\u27 cooperative tendency which in essence is a component of human capital distinct from cognitive ability. People may choose to invest in appropriate cooperative tendencies to maximize their life-time utility. The investment, however, is typically not efficient because its social returns are always strictly larger than individual returns. This investment externality leads to multiple equilibria so that social trust levels are history dependent. However, the stable equilibrium with non-extreme social trust level is unique under certain conditions. The model suggests the importance of education system as well as other forces in affecting social trust. Social status and relative performance concern. We care about our standing relative to other members in our social group. In this essay we provide a simple social learning model to illustrate the efficiency rationale for such relative rank concerns. Our peers or others who are affected by our activities have incentives to provide appropriate social rewards and penalties for us to behave properly. Individual social status can be measured by the net social rewards offered by others. The same is true for group social status. Though we do not derive utility from our relative performance per se, we do care about the social consequences associated with it. We characterize the equilibrium social status regimes in a group and investigate how individual effort, group size and composition are affected. We show that social optimal results can be realized in equilibrium. The main message of the essay is that social status is determined by the net positive externalities a person or a group has on others. Our findings can account for why we have different relative rank concerns in different situations, and why we care more about local status than the global one. Estimation of child development production functions. In the essay production functions of child cognitive and social development are estimated using the tree-structured regression. A sample of eight- and nine-year old children from NLSY(79) child data is used, containing over two hundred home and school inputs starting from mother\u27s prenatal tare period. The estimation is conducted under various specifications used in the literature, including value-added and within-child difference methods. The estimation results show that in most cases earlier scores are not sufficient statistics for historical inputs. Child\u27s innate abilities have large effects on child development. The effects of race and maternal employment are also discussed