This dissertation examines how small Iowa communities respond to sudden events that significantly impact the local economy (economic shocks). I focus my analysis on two specific types of economic shocks: 1.) internally generated and positive in regards to the local economy and 2.) externally generated and negative in regards to the local economy. As these economic shocks occur, some communities may retain their local quality of life where others do not. I focus on social capital as a pivotal concept in explaining why some communities are better able to retain their quality of life. The literature suggests that quality of life may be affected differently in communities depending on the type of shock(s) and the amount of social capital within the community. Utilizing longitudinal survey data and over 600 key informant interviews I found that social capital offered a greater explanation of post shock quality of life and the percent change in quality of life from 1994 - 2004 in small Iowa towns than the cumulative effects of either type of economic shocks.