This dissertation provides insights into the process of social capital formation by extending a model of individual social capital investment and empirically identifying factors that affect an individual's social capital behavior. Social capital is defined as those social interactions that generate externalities in which either the interaction or the external benefit persists in time. I extend the neoclassical social capital investment model developed by Glaeser, Laibson and Sacerdote (2002) by introducing instantaneous returns to social interaction as distinct from the stream of future benefits derived from social capital and by redefining the social multiplier to include community institutions and characteristics.; The parameters of the social capital investment model are estimated using computational techniques. The estimated parameter values are then used to simulate changes in a representative agent's behavior due to perturbations in the model parameters, individual characteristics or community characteristics. I use survey data collected from homeowners in Franklin County, Ohio, and community characteristics from secondary sources to generate the parameter estimates and simulate investment behavior.; There are four important results from this research. First, social capital investment is positively related to educational attainment and negatively related to wages, as has been suggested by others. Second, social capital investment appears to happen without concern for future benefits. Third, personal characteristics affect both the level of investment as well as the volatility in investment over the lifecycle. Fourth, the presence of formal institutions positively affects investment behavior, while community social capital stocks do not affect social capital investment.; This research makes significant theoretical and empirical contributions to the social capital literature. The theoretical model provides a framework useful for analyzing social capital formation. The empirical results demonstrate a method of analyzing social capital formation and provide evidence of factors that influence the formation process.
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