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Social capital, houshold welfare, and poverty in Indonesia

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  • Grootaert, Christiaan
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    Abstract

    The author empirically estimates how social capital affects household welfare and poverty in Indonesia. His focus: household memberships in local associations, an aspect of social capital especially relevant to daily household decisions that affect welfare and consumption. The data suggest that households with higher social capital spend more per capita. They also have more assets, more savings, and better access to credit. To estimate how social capital contributes to household welfare, the author uses a reduced-form model of household welfare, which controls for relevant household and location characteristics. He measures social capital along six dimensions: density of memberships, internal heterogeneity of associations (by age, gender, education, religion, and so on), meeting attendance, active participation in decision-making, payment of dues, and community orientation. The strongest effects come from: A) Number of memberships. Each additional membership (an average of 20 percent increase) raises per capita household spending 1.5 percent. B) Internal heterogeneity. An increase of 20 percent in the heterogeneity index correlates with 3.3 percent more spending. C) Active participation in decision making. An increase of 20 percent in the participation index correlates with 3.2 percent more spending. The author also estimates structural equations and uses instrumental variable estimation and historical data to address the possible endogeneity of the social capital variable and to demonstrate that the causality runs from social capital to household welfare.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2148.

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    Date of creation: 31 Jul 1999
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    Handle: RePEc:wbk:wbrwps:2148

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    Related research

    Keywords: Public Health Promotion; Capital Markets and Capital Flows; Decentralization; Social Capital; Economic Theory&Research; Economic Theory&Research; Health Economics&Finance; Community Development and Empowerment; Poverty Assessment; Social Capital;

    References

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    1. Narayan, Deepa & Pritchett, Lant, 1999. "Cents and Sociability: Household Income and Social Capital in Rural Tanzania," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 47(4), pages 871-97, July.
    2. Isham, Jonathan & Narayan, Deepa & Pritchett, Lant, 1995. "Does Participation Improve Performance? Establishing Causality with Subjective Data," World Bank Economic Review, World Bank Group, World Bank Group, vol. 9(2), pages 175-200, May.
    3. Uphoff, Norman, 1993. "Grassroots organizations and NGOs in rural development: Opportunities with diminishing states and expanding markets," World Development, Elsevier, Elsevier, vol. 21(4), pages 607-622, April.
    4. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, Elsevier, vol. 46(1), pages 1-18, February.
    5. Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant, 1995. "Governance and returns on investment : an empirical investigation," Policy Research Working Paper Series, The World Bank 1550, The World Bank.
    6. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, Elsevier, vol. 25(10), pages 1731-1742, October.
    7. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 351-66, September.
    8. Thorbecke, Erik, 1991. "Adjustment, growth and income distribution in Indonesia," World Development, Elsevier, Elsevier, vol. 19(11), pages 1595-1614, November.
    9. Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups," FCND discussion papers, International Food Policy Research Institute (IFPRI) 13, International Food Policy Research Institute (IFPRI).
    10. Woolcock, Michael & Narayan, Deepa, 2000. "Social Capital: Implications for Development Theory, Research, and Policy," World Bank Research Observer, World Bank Group, World Bank Group, vol. 15(2), pages 225-49, August.
    11. Jonathan Isham, 2002. "The Effect of Social Capital on Fertilizer Adoption: Evidence from Rural Tanzania," Middlebury College Working Paper Series, Middlebury College, Department of Economics 0225, Middlebury College, Department of Economics.
    12. repec:fth:oxesaf:98-8 is not listed on IDEAS
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    Cited by:
    1. Coady, David & Xinyi Dai & Limin Wang, 2001. "Community programs and women's participation : the Chinese experience," Policy Research Working Paper Series, The World Bank 2622, The World Bank.
    2. Jonathan Isham, 2002. "The Effect of Social Capital on Fertiliser Adoption: Evidence from Rural Tanzania," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 11(1), pages 39-60, March.
    3. Patrick, Ian & Marshall, Graham R. & Abdurrahman, Muktasam & Ambarawati, I Gusti Agung Ayu, 2006. "Determining the Role of Social Capital in Linking Smallholders with Agribusiness," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia, Australian Agricultural and Resource Economics Society 139890, Australian Agricultural and Resource Economics Society.
    4. Ian W. Jones & Chris M. Nyland & Michael G. Pollitt, 2004. "Multinationals in Developing Communities: how EU Multinationals build Social Capital in Poland," ESRC Centre for Business Research - Working Papers, ESRC Centre for Business Research wp285, ESRC Centre for Business Research.
    5. Hvid, Anna Kirstine & Henningsen, Geraldine Adrienne, 2014. "A new scramble for land or an unprecedented opportunity for the rural poor? Distributional consequences of increasing land rents in developing countries," MPRA Paper 52919, University Library of Munich, Germany.
    6. I Jones & C.M Nyland & M.G Pollitt, 2001. "How do Multinationals Build Social Capital? Evidence from South Africa," ESRC Centre for Business Research - Working Papers, ESRC Centre for Business Research wp220, ESRC Centre for Business Research.
    7. Edward Miguel & Paul Gertler & David Levine, 2004. "Did Industrialization Destroy Social Capital in Indonesia?," Development and Comp Systems, EconWPA 0407006, EconWPA.
    8. Sujarwoto, Sujarwoto & Tampubolon, Gindo, 2013. "Mother's social capital and child health in Indonesia," Social Science & Medicine, Elsevier, Elsevier, vol. 91(C), pages 1-9.
    9. Jonathan Isham, 2002. "Social Capital and Consumption among Agricultural Households," Middlebury College Working Paper Series, Middlebury College, Department of Economics 0202, Middlebury College, Department of Economics.

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