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Social capital and the reproduction of economic inequality in polarized societies

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  • Mogues, Tewodaj
  • Carter, Michael

Abstract

This paper explores the idea of how wealth is distributed across social groups (ethnic or language groups, gender, etc.) and how such distribution fundamentally affects the evolution of economic inequality. By providing microfoundations suitable for this exploration, the paper hopes to enhance the understanding of when social forces contribute to the reproduction of economic inequality. In tackling this issue, the paper offers contributions in two domains. First, it models social capital as a real capital asset with direct use and collateral value. Second, it extends the concepts of identity, alienation and polarization used by Esteban and Ray (1994). This generalization permits consideration of the multiple characteristics that shape social identity, inclusion and exclusion. It also underwrites a higher-order measure of socioeconomic polarization that permits exploration of the hypothesis that economic inequality is most pernicious and persistent when it is socially embedded. Among other things the paper shows that holding constant the initial levels of economic polarization and wealth inequality, higher socioeconomic polarization increases subsequent income and wealth inequality. Far from being a distributionally neutral panacea for missing markets, social capital in this model may itself generate exclusion and deepen social and economic cleavages.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series DSGD discussion papers with number 25.

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Date of creation: 2005
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Handle: RePEc:fpr:dsgddp:25

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Keywords: Equality ; Social capital ; economic distribution ;

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References

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  1. Esteban, J. & Ray, D., 1993. "On the Measurement of Polarization," UFAE and IAE Working Papers 221.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  3. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2003. "Polarization: Concepts, Measurement, Estimation," Working Papers 46, Barcelona Graduate School of Economics.
  4. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
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  6. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  7. repec:clg:wpaper:2001-02 is not listed on IDEAS
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  18. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
  19. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  20. Fafchamps, Marcel & Minten, Bart, 1998. "Relationships and traders in Madagascar," MTID discussion papers 24, International Food Policy Research Institute (IFPRI).
  21. Howard Bodenhorn & Christopher S. Ruebeck, 2003. "The Economics of Identity and the Endogeneity of Race," NBER Working Papers 9962, National Bureau of Economic Research, Inc.
  22. Mogues, Tewodaj, 2008. "A two-dimensional measure of polarization:," IFPRI discussion papers 837, International Food Policy Research Institute (IFPRI).
  23. Woolcock, Michael & Narayan, Deepa, 2000. "Social Capital: Implications for Development Theory, Research, and Policy," World Bank Research Observer, World Bank Group, vol. 15(2), pages 225-49, August.
  24. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  25. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  26. Laing, Derek, 1994. "Firm Specific Human Capital as an Employer Discipline Device," Economic Inquiry, Western Economic Association International, vol. 32(1), pages 128-37, January.
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Citations

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Cited by:
  1. Dinda, Soumyananda, 2006. "Social Capital in the creation of Human Capital and Economic Growth: A Productive Consumption Approach," MPRA Paper 50586, University Library of Munich, Germany, revised 28 May 2007.
  2. Muhammad Chani & Sajjad Jan & Zahid Pervaiz & Amatul Chaudhary, 2014. "Human capital inequality and income inequality: testing for causality," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 149-156, January.
  3. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2005. "Shocks, Sensitivity and Resilience: Tracking the Economic Impacts of Environmental Disaster on Assets in Ethiopia and Honduras," Staff Paper Series 489, University of Wisconsin, Agricultural and Applied Economics.
  4. Sommarat Chantarat & Christopher Barrett, 2012. "Social network capital, economic mobility and poverty traps," Journal of Economic Inequality, Springer, vol. 10(3), pages 299-342, September.
  5. Mogues, Tewodaj, 2008. "A two-dimensional measure of polarization:," IFPRI discussion papers 837, International Food Policy Research Institute (IFPRI).
  6. Ronelle Burger & Marisa Coetzee & Carina van der Watt, 2013. "Estimating the benefits of linking ties in a deeply divided society: considering the relationship between domestic workers and their employers in South Africa," Working Papers 18/2013, Stellenbosch University, Department of Economics.
  7. Saint-Macary, Camille, 2012. "Are Ethnically Diverse Communities “Bad” Communities? An Empirical Study on Social Capital Formation in Northern Vietnam," Economics Papers from University Paris Dauphine 123456789/11437, Paris Dauphine University.
  8. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
  9. Mogues, Tewodaj, 2006. "Shocks, livestock asset dynamics and social capital in Ethiopia:," DSGD discussion papers 38, International Food Policy Research Institute (IFPRI).
  10. Chani, Muhammad Irfan & Hassan, Mahboob Ul & Shahid, Muhammad, 2012. "Human capital formation and economic development in Pakistan: an empirical analysis," MPRA Paper 38925, University Library of Munich, Germany.
  11. Santos, Paulo & Barrett, Christopher B., 2006. "Informal Insurance in the Presence of Poverty Traps: Evidence from Southern Ethiopia," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25487, International Association of Agricultural Economists.

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