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Social Network Capital, Economic Mobility and Poverty Traps

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  • Chantarat, Sommarat
  • Barrett, Christopher B.

Abstract

The paper explores the role social network capital might play in facilitating poor agents’ escape from poverty traps. We model endogenous network formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can serve as either a complement to or a substitute for productive assets in facilitating some poor households’ escape from poverty. However, the voluntary nature of costly social network formation also creates both involuntary and voluntary exclusionary mechanisms that impede some poor households’ efforts to exit poverty. The ameliorative potential of social networks therefore depends fundamentally on the underlying wealth distribution in the economy. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1947.

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Date of creation: 14 Feb 2007
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Handle: RePEc:pra:mprapa:1947

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Keywords: social network capital; endogenous network formation; poverty traps; multiple equilibria; social isolation; social exclusion; crowding-in transfer;

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Cited by:
  1. Jia, Xiangping, 2009. "Synergistic Green and White Revolution: Evidence from Kenya and Uganda," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51367, International Association of Agricultural Economists.
  2. 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, Paris Dauphine University 123456789/11437, Paris Dauphine University.
  3. Lyndon Walker & Peter Davis, 2013. "Modelling \"Marriage Markets\": A Population-Scale Implementation and Parameter Test," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 16(1), pages 6.
  4. Bhattamishra, Ruchira & Barrett, Christopher B., 2010. "Community-Based Risk Management Arrangements: A Review," World Development, Elsevier, Elsevier, vol. 38(7), pages 923-932, July.

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