A spatial, simultaneous model of social capital and poverty

This study explores the interrelationship between social capital and poverty, a negative indicator of well-being, in the Western United States. Econometric models that account for the endogeneity of poverty and social capital, spatial dependence, and cross-equation error correlation were used to explore two questions: is the presence of social capital associated with reduced poverty levels and does the presence of poverty impact social capital stocks? We found evidence that communities with higher social capital levels tend to have lower poverty rates and that poverty may pose barriers to social capital formation. This suggests that policies to reduce poverty will be more effective if coupled with policies to support social capital formation. The study's findings are particularly salient for communities in persistent poverty. These results emerged only after accounting for endogeneity and spatial relationships. Because many factors contributing to well-being are jointly determined with well-being and indicators of well-being are frequently spatially clustered, this situation is likely to be more common than has been typically recognized in the literature.