IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Social Capital Formation and Credit Access: Evidence from Sri Lanka

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

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0305750X12002057
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal World Development.

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

as
in new window

Handle: RePEc:eee:wdevel:v:40:y:2012:i:12:p:2522-2536
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Shoji, Masahiro & Aoyagi, Keitaro & Kasahara, Ryuji & Sawada, Yasuyuki, 2010. "Motives behind Community Participation," Working Papers 16, JICA Research Institute.
  2. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
  3. Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," NBER Working Papers 10485, National Bureau of Economic Research, Inc.
    • Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
  4. Steven N. Durlauf, 2002. "On the Empirics of Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 459-479, November.
  5. Foster, Andrew D, 1995. "Prices, Credit Markets and Child Growth in Low-Income Rural Areas," Economic Journal, Royal Economic Society, vol. 105(430), pages 551-70, May.
  6. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
  7. Stephen R. Boucher & Catherine Guirkinger & Carolina Trivelli, 2009. "Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 609-640, 07.
  8. Karlan, Dean S., 2007. "Social Connections and Group Banking," CEPR Discussion Papers 6194, C.E.P.R. Discussion Papers.
  9. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," CSAE Working Paper Series 2003-12, Centre for the Study of African Economies, University of Oxford.
  10. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
  11. Rose, Elaina, 2001. "Ex ante and ex post labor supply response to risk in a low-income area," Journal of Development Economics, Elsevier, vol. 64(2), pages 371-388, April.
  12. Karlan, Dean & Mobius, Markus & Rosenblat, Tanya & Szeidl, Adam, 2009. "Trust and Social Collateral," Staff General Research Papers 13026, Iowa State University, Department of Economics.
  13. Anderson, C Leigh & Dietz, Maya & Gordon, Andrew & Klawitter, Marieka, 2004. "Discount Rates in Vietnam," Economic Development and Cultural Change, University of Chicago Press, vol. 52(4), pages 873-87, July.
  14. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364.
  15. Abigail Barr & Marcel Fafchamps, 2010. "The formation of community based organizations in sub-Saharan Africa: an analysis of a quasi-experiment," Economics Series Working Papers CSAE WPS/2010-21, University of Oxford, Department of Economics.
  16. Marcel Fafchamps, 2006. "Development and social capital," Journal of Development Studies, Taylor & Francis Journals, vol. 42(7), pages 1180-1198.
  17. Garcia, R. & Lusardi, A. & Ng, S., 1995. "Excess Sensitivity and Asymmetries in Consumption: an Empirical Investigation," Cahiers de recherche 9511, Universite de Montreal, Departement de sciences economiques.
  18. Miguel, Edward & Gertler, Paul & Levine, David I, 2006. "Does Industrialization Build or Destroy Social Networks?," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 287-317, January.
  19. Edward L. Glaeser & David Laibson & Jose A. Scheinkman & Christine L. Soutter, 1999. "What is Social Capital? The Determinants of Trust and Trustworthiness," NBER Working Papers 7216, National Bureau of Economic Research, Inc.
  20. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November.
  21. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
  22. Jonathan Isham & Satu Kahkonen, 2002. "Institutional Determinants of the Impact Community-Based Water Services: Evidence from Sri Lanka and India," Middlebury College Working Paper Series 0220, Middlebury College, Department of Economics.
  23. Lisa R. Anderson & Jennifer M. Mellor & Jeffrey Milyo, 2004. "Social Capital and Contributions in a Public-Goods Experiment," American Economic Review, American Economic Association, vol. 94(2), pages 373-376, May.
  24. Uphoff, Norman & Wijayaratna, C. M., 2000. "Demonstrated Benefits from Social Capital: The Productivity of Farmer Organizations in Gal Oya, Sri Lanka," World Development, Elsevier, vol. 28(11), pages 1875-1890, November.
  25. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
  26. Hirokazu Ishise & Yasuyuki Sawada, 2006. "Aggregate Returns to Social Capital: Estimates Based on the Augmented Augmented-Solow Model," CIRJE F-Series CIRJE-F-413, CIRJE, Faculty of Economics, University of Tokyo.
  27. Anjini Kochar, 1999. "Smoothing Consumption by Smoothing Income: Hours-of-Work Responses to Idiosyncratic Agricultural Shocks in Rural India," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 50-61, February.
  28. Narayan, Deepa & Pritchett, Lant, 1997. "Cents and sociability : household income and social capital in rural Tanzania," Policy Research Working Paper Series 1796, The World Bank.
  29. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
  30. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
  31. Sawada, Yasuyuki & Shoji, Masahiro & Sugawara, Shinya & Shinkai, Naoko, 2010. "The Role of Infrastructure in Mitigating Poverty Dynamics:The Case of an Irrigation Project in Sri Lanka," Working Papers 4, JICA Research Institute.
  32. Stephen P. Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 16-88, Wharton School Rodney L. White Center for Financial Research.
  33. Kerwin Charles & Patrick Kline, 2002. "Relational Costs and the Production of Social Capital: Evidence from Carpooling," NBER Working Papers 9041, National Bureau of Economic Research, Inc.
  34. Behrman, Jere R, 1988. "Intrahousehold Allocation of Nutrients in Rural India: Are Boys Favored? Do Parents Exhibit Inequality Aversion?," Oxford Economic Papers, Oxford University Press, vol. 40(1), pages 32-54, March.
  35. Paal, Beatrix & Wiseman, Thomas, 2011. "Group insurance and lending with endogenous social collateral," Journal of Development Economics, Elsevier, vol. 94(1), pages 30-40, January.
  36. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
  37. Jere R. Behrman & Anil B. Deolalikar, 1990. "The Intrahousehold Demand for Nutrients in Rural South India: Individual Estimates, Fixed Effects, and Permanent Income," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 665-696.
  38. Abhijit Banerjee & Esther Duflo & Gilles Postel-Vinay & Tim Watts, 2010. "Long-Run Health Impacts of Income Shocks: Wine and Phylloxera in Nineteenth-Century France," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 714-728, November.
  39. Eswaran, Mukesh & Kotwal, Ashok, 1989. "Credit as insurance in agrarian economies," Journal of Development Economics, Elsevier, vol. 31(1), pages 37-53, July.
  40. Tanguy Bernard & Alain De Janvry & Elisabeth Sadoulet, 2010. "When Does Community Conservatism Constrain Village Organizations?," Economic Development and Cultural Change, University of Chicago Press, vol. 58(4), pages 609-641, 07.
  41. Yujiro Hayami, 2009. "Social Capital, Human Capital and the Community Mechanism: Toward a Conceptual Framework for Economists," Journal of Development Studies, Taylor & Francis Journals, vol. 45(1), pages 96-123.
  42. James J. Heckman & Thomas E. Macurdy, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 47-74.
  43. repec:dau:papers:123456789/4392 is not listed on IDEAS
  44. Isham, Jonathan & Kahkonen, Satu, 2002. "Institutional Determinants of the Impact of Community-Based Water Services: Evidence from Sri Lanka and India," Economic Development and Cultural Change, University of Chicago Press, vol. 50(3), pages 667-91, April.
  45. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
  46. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  47. John Hoddinott, 2006. "Shocks and their consequences across and within households in Rural Zimbabwe," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 301-321.
  48. Kochar, Anjini, 2004. "Ill-health, savings and portfolio choices in developing economies," Journal of Development Economics, Elsevier, vol. 73(1), pages 257-285, February.
  49. Richard A. Posner, 1979. "A Theory of Primitive Society with Special Reference to Law," University of Chicago - George G. Stigler Center for Study of Economy and State 7, Chicago - Center for Study of Economy and State.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:40:y:2012:i:12:p:2522-2536. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.