Economic crisis and social capital : The effects of the Great Recession on social capital in Sweden

Abstract: This paper studies the effects of the economic distress that occurred in Swedish municipalities during the financial crisis of 2008 and its effects on social capital. By comparing more exposed municipalities in terms of the decline in employment to less exposed municipalities with a difference-in-difference approach, the aim is to see if the Great Recession had heterogeneous effects on social capital in Sweden. The overall trends in social capital for both groups over the period are positive or stable with a minor plunge during the crisis. However, there are indications of a polarisations concerning trust in other people and in government, where the increase was supressed in more affected municipalities compared to less. For trust in government, it is more educated people and men that drives the negative results while foreign-born saw an increase. The loss in trust in government in the comparison made is more pronounced the more economically distressed the municipality was. Moreover, there seems to be a polarisation in confidence in parliament and satisfaction with democracy, but due to violated parallel trends assumptions it might not be due to the crisis.