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Social Capital, Network Effects, and Savings in Rural Vietnam

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  • Carol Newman
  • Finn Tarp
  • Katleen Van Den Broeck

Abstract

Information failures are a major barrier to formal financial saving in low-income countries. We explore the extent to which social capital in rural Vietnam plays a role in increasing formal savings where knowledge gaps exist. Social capital is defined as information sharing and the elimination of information asymmetries through active participation in the Women's Union. We consider high- and low-quality networks in terms of the quality of information transmitted. We find that membership of high-quality networks leads to higher levels of saving in formal financial institutions and saving for productive investments. Our results support a role for social capital in facilitating savings and suggest that transmitting financial information through the branches of the Women's Union could be effective in increasing formal savings at grassroots level. We also conclude that it is important to ensure that the information disseminated is accurate given that behavioral effects are also found in networks with low-quality information.

Suggested Citation

  • Carol Newman & Finn Tarp & Katleen Van Den Broeck, 2014. "Social Capital, Network Effects, and Savings in Rural Vietnam," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 79-99, March.
  • Handle: RePEc:bla:revinw:v:60:y:2014:i:1:p:79-99
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    Cited by:

    1. Markus Jäntti & Ravi Kanbur & Jukka Pirttilä, 2014. "Poverty, Development, and Behavioral Economics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 1-6, March.
    2. Markussen Thomas, 2015. "Social and political capital in rural Viet Nam," WIDER Working Paper Series 087, World Institute for Development Economic Research (UNU-WIDER).
    3. Ha van Dung, 2014. "Short-term precaution, insurance and saving mechanisms in rural Vietnam," Working Papers CIE 82, Paderborn University, CIE Center for International Economics.
    4. Newman Carol & Kinghan Christina, 2015. "Social Capital, Political Connections, and Household Enterprises: Evidence from Vietnam," WIDER Working Paper Series 001, World Institute for Development Economic Research (UNU-WIDER).

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