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Social Capital Formation and Credit Access: Evidence from Sri Lanka

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Author Info

  • Shoji, Masahiro
  • Aoyagi, Keitaro
  • Kasahara, Ryuji
  • Sawada, Yasuyuki
  • Ueyama, Mika

Abstract

While previous studies evaluate the impact of social capital on development outcomes, there are very few empirical studies on determinants of social capital formation. We use unique long panel data from Sri Lanka to examine the mechanism of social capital formation in an imperfect credit market. We show that households facing credit constraints reduce investments in social capital. Furthermore, temporal declines in investment persistently reduce general trust, trust in villagers, and trust in business partners. While previous studies argue that social capital improves access to informal credit, we show the reverse causality. Combining these findings suggests a potential poverty trap.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 12 ()
Pages: 2522-2536

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:12:p:2522-2536

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: social capital formation; credit constraints; infrastructure; South Asia; Sri Lanka;

References

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Cited by:
  1. Sellamuttu, Sonali Senaratna & Aida, Takeshi & Kasahara, Ryuji & Sawada, Yasuyuki & Wijerathna, Deeptha, 2013. "How Access to Irrigation Influences Poverty and Livelihoods:A Case Study from Sri Lanka," Working Papers 59, JICA Research Institute.

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