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Social capital as a substitute for formality: Evidence from Bolivia

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  • Annen, Kurt

Abstract

The paper studies the role of social capital in the urban informal sector in Bolivia. It shows that a formal firm has about 6.4 times the sales of an informal firm with no social capital, but informal firms use their social capital to compensate for the lack of formal productivity benefits. By being formal, firms obtain permanent visibility because they can operate a shop or a visible production location and they can produce in locations with better public infrastructure. Informal firms, in contrast, sell in one place – typically in street markets in front of formal shops – and produce in another — typically in the outskirts. Social capital increases accessibility of informal firms and provides them with security benefits at their production location.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 31 (2013)
Issue (Month): C ()
Pages: 82-92

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Handle: RePEc:eee:poleco:v:31:y:2013:i:c:p:82-92

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Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords: Social capital; Formal and informal institutions; Informal sector; Small firms; Bolivia;

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References

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  1. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
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  7. Woodruff, Christopher, 1998. "Contract enforcement and trade liberalization in Mexico's footwear industry," World Development, Elsevier, vol. 26(6), pages 979-991, June.
  8. Marcel Fafchamps, 2005. "Development and Social Capital," Economics Series Working Papers GPRG-WPS-007, University of Oxford, Department of Economics.
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  11. Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
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Cited by:
  1. Bjornskov, Christian & Bogetic, Zeljko & Hillman, Arye & Popovic, Milenko, 2014. "Trust and Identity in a Small, Post-Socialist, Post-Crisis Society," EconStor Preprints 95968, ZBW - German National Library of Economics.

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