Investment in Social Capital by Korean Baby-Boomers and the Elderly

Social capital is both an input and an output of individuals' economic choices, but relatively little is known about social capital investment, particularly in individuals' old age. With a premise that SC is an individual-level concept in which individuals purposely invest, we estimate elderly individuals' indexes of the stock and investment in social capital using principal component analysis of their social engagement, networks, and trust in social institutions. We describe the distribution of the social capital stock and investment across various demographic groups, and using a capital-accumulation model, we test hypotheses about the drivers – expected benefits, costs, depreciation, preexisting social capital, and social-capital in one's community – of individuals' decisions to accumulate social capital. Linear regressions and mixture models of group-based trajectories are used to identify the determinants and the evolution of social capital investment in individuals' older age. Implications for their life satisfaction are assessed. Using four waves of the Korean Longitudinal Study of Ageing, we find that the elderly exhibit gradual attrition of social capital, but women retain more social capital on account of better mental health and higher returns on investment from lower starting points. Expected returns on individuals' social capital affect the investment positively, while costs including opportunity cost of one's time, and social capital depreciation affect it negatively. Physical and human capital appear to be complementary to social capital, encouraging investment. Stock and investment in social capital in a community lead to higher investment by individuals themselves