The effects of industrialization on social capital: the case of Iran

Purpose – This article aims to take into consideration the mechanism in which the process of industrialization affects social capital in Iran. Design/methodology/approach – In order to investigate the way in which industrialization affects social capital, a system of simultaneous equations has been introduced and then coefficients have been estimated using the three stages least squares method and the panel data of the 30 provinces of the country during the 2001-2006 period. Findings – The results show that industrialization has a significant effect on the level and composition of social capital in Iran. Although industrialization has improved the level of income through which bridging social capital has increased, a large part of this effect has been balanced out as a result of worsening the income distribution due to industrialization. Since industrialization has increased migration from non-industrial to industrial regions, bonding social capital has been weakened while bridging social capital in the immigrant accepting regions has been strengthened. The increase of specialization in economic activities and division of labor resulting from industrialization have also improved bridging social capital and worsened bonding social capital. Industrialization has increased the demand for education. However, due to the non-efficient and individual-based trainings, this variable does not show a significant effect on the level and composition of social capital. Originality/value – This research has tried to provide a more comprehensive theoretical explanation and introduced two more mechanisms through which industrialization can affect social capital. The subject of this paper is related to both economic and social affairs. Industrialization is one of the most important issues in the field of economic development and social capital is the completely relevant subject to cultural changes. Investigation of the social capital status and determinants can provide a suitable basis to analyse the cultural and social changes.