Abstract
Social capital of employers and employees in firms reduce the searching cost of the firm, increase trust among traders and hence increases productivity. This study is an effort to investigate the role of social capital on labor productivity in district Lahore using cross sectional data of manufacturing, trading and service firms. Data of 243 firms has been used to test the hypotheses, out of which 150 firms are included from manufacturing side, 43 from trading sector and 50 firms from service sector. Empirical results are clearly in the favor of social capital enhancement among employers and managers of different firms. Results of the study reveal that social capital of friends and traders and institutional relations are positively related to labor productivity but the results are heterogeneous among different sectors.