Does social capital affect wages? A panel data analysis of causal mechanisms

Many studies document the positive association between accessed social capital and wages. It is widely accepted that the underlying relationship is causal. However, most studies use cross-sectional data, and only a few test causal mechanisms. In our analysis, we first test a broad range of social capital indicators by applying fixed-effects panel data regression to a sample of currently employed and a sample of newly employed individuals. Second, we test reservation wages, network search, being offered a job without prior job search, and the number of job interviews as some of the theoretical mechanisms put forward to explain positive social capital effects. Overall, we find no empirical evidence for wage effects of the social capital measure and no evidence that any of the proposed mechanisms are empirically relevant.