Social Capital and Household Welfare in Cameroon: A Multidimensional Analysis

This study uses instrumental variables (IV) to investigate the causal influence of social capital on various welfare measures. The data set consists of a cross sectional data of the 2007 Cameroon Household Survey. Social capital variables are derived by memberships in social and cultural organizations, and five other associations. We found valid instruments for social capital at the aggregate level to determine its causal effect on household poverty as measured by household per capita expenditure, and on children schooling or enrolment. At individual level, the causal effect of social capital on labour force participation is determined. Social capital is found to increase household welfare and reduce poverty as well as raise children enrolment. It was also established that social capital has a beneficial causal influence on individual labour force participation. Estimates also suggest that the impact of social capital on household income and labour force participation are underestimated when correction for omitted variables bias is not taken into account. Generally, our analysis suggests that policy makers interested in improving the living conditions of households may be advised to consider promoting social capital as one relevant ingredient to achieve the Millennium Development Goals of reducing poverty by half.