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Social capital and the reproduction of economic inequality in polarized societies

  • Mogues, Tewodaj
  • Carter, Michael

This paper explores the idea of how wealth is distributed across social groups (ethnic or language groups, gender, etc.) and how such distribution fundamentally affects the evolution of economic inequality. By providing microfoundations suitable for this exploration, the paper hopes to enhance the understanding of when social forces contribute to the reproduction of economic inequality. In tackling this issue, the paper offers contributions in two domains. First, it models social capital as a real capital asset with direct use and collateral value. Second, it extends the concepts of identity, alienation and polarization used by Esteban and Ray (1994). This generalization permits consideration of the multiple characteristics that shape social identity, inclusion and exclusion. It also underwrites a higher-order measure of socioeconomic polarization that permits exploration of the hypothesis that economic inequality is most pernicious and persistent when it is socially embedded. Among other things the paper shows that holding constant the initial levels of economic polarization and wealth inequality, higher socioeconomic polarization increases subsequent income and wealth inequality. Far from being a distributionally neutral panacea for missing markets, social capital in this model may itself generate exclusion and deepen social and economic cleavages.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series DSGD discussion papers with number 25.

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Date of creation: 2005
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Handle: RePEc:fpr:dsgddp:25
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  1. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  2. Steven Durlauf & Marcel Fafchamps, 2004. "Social Capital," Development and Comp Systems 0409060, EconWPA.
    • 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.
  3. Alberto Alesina & Eliana La Ferrara, 1999. "Participation in Heterogeneous Communities," NBER Working Papers 7155, National Bureau of Economic Research, Inc.
  4. Woolcock, Michael & Narayan, Deepa, 2000. "Social Capital: Implications for Development Theory, Research, and Policy," World Bank Research Observer, World Bank Group, vol. 15(2), pages 225-49, August.
  5. Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
  6. 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.
  7. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2004. "Polarization: Concepts, Measurement, Estimation," Econometrica, Econometric Society, vol. 72(6), pages 1737-1772, November.
  8. Besley, T. & Coate, S., 1991. "Group Lending, Repayment Incentives And Social Collateral," Papers 152, Princeton, Woodrow Wilson School - Development Studies.
  9. Mogues, Tewodaj, 2008. "A two-dimensional measure of polarization:," IFPRI discussion papers 837, International Food Policy Research Institute (IFPRI).
  10. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  11. Howard Bodenhorn & Christopher S. Ruebeck, 2003. "The Economics of Identity and the Endogeneity of Race," NBER Working Papers 9962, National Bureau of Economic Research, Inc.
  12. Adolfo Figueroa & Teofilo Altamirano & Denis Sulmont, 1996. "Social exclusion and inequality in Peru," Libros de otras Editoriales, Departamento de Economía - Pontificia Universidad Católica del Perú, edition 1, number otr-1996-02.
  13. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
  14. Hanming Fang & Glenn C. Loury, 2004. "Toward An Economic Theory of Dysfunctional Identity," Cowles Foundation Discussion Papers 1483, Cowles Foundation for Research in Economics, Yale University.
  15. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
  16. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  17. Esteban, J. & Ray, D., 1993. "On the Measurement of Polarization," UFAE and IAE Working Papers 221.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  18. Robert J. Oxoby, 2004. "Cognitive dissonance, status and growth of the underclass," Economic Journal, Royal Economic Society, vol. 114(498), pages 727-749, October.
  19. Fafchamps, Marcel & Minten, Bart, 1998. "Relationships and traders in Madagascar," MTID discussion papers 24, International Food Policy Research Institute (IFPRI).
  20. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
  21. Laing, Derek, 1994. "Firm Specific Human Capital as an Employer Discipline Device," Economic Inquiry, Western Economic Association International, vol. 32(1), pages 128-37, January.
  22. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  23. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
  24. Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-22, July.
  25. repec:dau:papers:123456789/10091 is not listed on IDEAS
  26. Glenn C. Loury, 2000. "Social Exclusion and Ethnic Groups: The Challenge to Economics," Boston University - Institute for Economic Development 106, Boston University, Institute for Economic Development.
  27. Adolfo Figueroa, 2003. "La sociedad sigma: una teoría del desarrollo económico," Libros PUCP / PUCP Books, Fondo Editorial de la Pontificia Universidad Católica del Perú, edition 1, number lde-2003-04.
  28. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  29. Kuran, Timur, 1998. "Ethnic Norms and Their Transformation through Reputational Cascades," The Journal of Legal Studies, University of Chicago Press, vol. 27(2), pages 623-59, June.
  30. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  31. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
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