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Does social capital matter? Evidence from a five-country group lending experiment

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  • Alessandra Cassar
  • Bruce Wydick

Abstract

Does social capital matter to economic decision-making? We address this broad question through an artefactual group lending experiment carried out in five countries: India, Kenya, Guatemala, Armenia, and the Philippines, obtaining data on 10,673 contribution decisions from 1,554 subjects in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and borrowing group self-selection. Results show that societal trust positively and significantly influences group loan contribution rates, that group lending appears to create as well as harness social capital, and that peer monitoring can have perverse as well as beneficial effects. Copyright 2010 Oxford University Press 2010 All rights reserved, Oxford University Press.

Suggested Citation

  • Alessandra Cassar & Bruce Wydick, 2010. "Does social capital matter? Evidence from a five-country group lending experiment," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 715-739, October.
  • Handle: RePEc:oup:oxecpp:v:62:y:2010:i:4:p:715-739
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    File URL: http://hdl.handle.net/10.1093/oep/gpq010
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    Cited by:

    1. Leonardo Becchetti & Stefano Castriota & Pierluigi Conzo, 2012. "Bank strategies in catastrophe settings: empirical evidence and policy suggestions," Econometica Working Papers wp43, Econometica.
    2. Renate Strobl & Conny Wunsch, 2017. "Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya," CESifo Working Paper Series 6578, CESifo Group Munich.
    3. Thilo Klein, 2015. "Does Anti-Diversification Pay? A One-Sided Matching Model of Microcredit," Cambridge Working Papers in Economics 1521, Faculty of Economics, University of Cambridge.
    4. Fetzer, Thiemo, 2016. "Commercialization and the Decline of Joint Liability Microcredit," The Warwick Economics Research Paper Series (TWERPS) 1119, University of Warwick, Department of Economics.
    5. Bryan McCannon & Zachary Rodriguez, 2016. "A Lasting Effect of the HIV/AIDS Pandemic: Orphans and Pro-Social Behavior," Working Papers 16-10, Department of Economics, West Virginia University.
    6. Karel Janda & Barbora Svarovska, 2012. "Suitability of Microfinance as an Investment Option," CERGE-EI Working Papers wp470, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Cristina Bodea & Adrienne LeBas, 2013. "The Origins of Social Contracts: Attitudes toward Taxation in Urban Nigeria," CSAE Working Paper Series 2013-02, Centre for the Study of African Economies, University of Oxford.
    8. Sarah Pearlman, 2014. "Dropouts, Defaulters, and Continuing Borrowers: Client Exit from Microfinance," The Developing Economies, Institute of Developing Economies, vol. 52(4), pages 301-321, December.
    9. repec:spr:soinre:v:132:y:2017:i:2:d:10.1007_s11205-016-1299-0 is not listed on IDEAS
    10. Cristina Bodea & Adrienne LeBas, 2013. "The Origins of Social Contracts: Attitudes toward Taxation in Urban Nigeria," Economics Series Working Papers WPS/2013-02, University of Oxford, Department of Economics.
    11. Giorgia Barboni & Alessandra Cassar & Arturo Rodriguez Trejo & Bruce Wydick, 2013. "Adverse Selection and Moral Hazard in Joint Liability Loan Contracts: Evidence from an Artefactual Field Experiment," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 9(2), pages 153-184, July.
    12. Aggarwal, Shilpa & Klapper, Leora & Singer, Dorothe, 2012. "Financing businesses in Africa : the role of microfinance," Policy Research Working Paper Series 5975, The World Bank.
    13. Leonardo Becchetti & Pierluigi Conzo & Giacomo Degli Antoni, 2015. "Public disclosure of players’ conduct and common resources harvesting: experimental evidence from a Nairobi slum," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(1), pages 71-96, June.

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