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Trust, membership in groups, and household welfare

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Listed author(s):
  • Haddad, Lawrence James
  • Maluccio, John A.

Abstract

This paper explores the relationship between group membership and trust. Specifically, the authors examine (1) the importance of trust in the decision to join groups, (2) the subsequent ability of groups to generate trust, and (3) the influence of group membership and trust on a measure of well-being, per capita household income. They use longitudinal data from KwaZulu-Natal Province, South Africa, allowing them to control for potential simultaneity and measurement-error problems in the estimation. They disaggregate groups into financial and nonfinancial and “trust in people” by type of agent or actor. They can thus examine whether different types of trust are important for participating in different types of groups and whether different types of group participation are important for generating different types of trust. The research finds that (1) trust in local agents is an important determinant of membership in financial groups but not for membership in nonfinancial groups, (2) membership in both types of groups generates trust in nonlocal agents but not local agents, and (3) membership in financial and nonfinancial groups leads to higher well-being. The first two results suggest that financial groups serve a role in expanding the radius of trust, while the first and third results suggest a role for trust in improving well-being.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series FCND discussion papers with number 135.

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Date of creation: 2002
Handle: RePEc:fpr:fcnddp:135
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Keywords: Community participation South Africa. ; Financial institutions South Africa. ; Trust. ; Group membership. ;

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  1. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
    • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  2. Francis Fukuyama, 2000. "Social Capital and Civil Society," IMF Working Papers 00/74, International Monetary Fund.
  3. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
  4. 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.
  5. Alberto Alesina & Eliana La Ferrara, 2000. "The Determinants of Trust," NBER Working Papers 7621, National Bureau of Economic Research, Inc.
  6. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
  7. Julian May & Michael Carter & Lawrence Haddad & John Maluccio, 2000. "KwaZulu-Natal Income Dynamics Study (KIDS) 1993-98: A longitudinal household database for South African policy analysis," Development Southern Africa, Taylor & Francis Journals, vol. 17(4), pages 567-581.
  8. La Ferrara, Eliana, 2002. "Inequality and group participation: theory and evidence from rural Tanzania," Journal of Public Economics, Elsevier, vol. 85(2), pages 235-273, August.
  9. Zeller, Manfred, 1998. "Determinants of Repayment Performance in Credit Groups: The Role of Program Design, Intragroup Risk Pooling, and Social Cohesion," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 599-620, April.
  10. John Maluccio & Lawrence Haddad & Julian May, 2000. "Social capital and household welfare in South Africa, 1993-98," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 54-81.
  11. John A. Maluccio, 2004. "Using Quality of Interview Information to Assess Nonrandom Attrition Bias in Developing-Country Panel Data," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 91-109, 02.
  12. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2000. "The Economic Approach to Social Capital," NBER Working Papers 7728, National Bureau of Economic Research, Inc.
  13. Barr, Abigail, 2000. "Social Capital and Technical Information Flows in the Ghanaian Manufacturing Sector," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 539-559, July.
  14. Bebbington, Anthony, 1999. "Capitals and Capabilities: A Framework for Analyzing Peasant Viability, Rural Livelihoods and Poverty," World Development, Elsevier, vol. 27(12), pages 2021-2044, December.
  15. 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 225-249, August.
  16. Bouis, Howarth E., 1994. "Agricultural technology and food policy to combat iron deficiency in developing countries," FCND discussion papers 1, International Food Policy Research Institute (IFPRI).
  17. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  18. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July.
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Cited by:

  1. Enid Katungi & Svetlana Edmeades & Melinda Smale, 2008. "Gender, social capital and information exchange in rural Uganda," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(1), pages 35-52.
  2. Quisumbing, Agnes R. & McNiven, Scott & Godquin, Marie, 2008. "Shocks, groups, and networks in Bukidnon, Philippines:," CAPRi working papers 84, International Food Policy Research Institute (IFPRI).
  3. Greig, Fiona & Bohnet, Iris, 2005. "Is There Reciprocity in a Reciprocal Exchange Economy? Evidence from a Slum in Nairobi, Kenya," Working Paper Series rwp05-044, Harvard University, John F. Kennedy School of Government.
  4. Daniel Haile & Abdolkarim Sadrieh & Harrie A. A Verbon, 2006. "Cross-Racial Envy and Underinvestment in South Africa," CESifo Working Paper Series 1657, CESifo Group Munich.
  5. Alvin Etang, 2008. "Modelling the Effects of Socio-Economic Characteristics on Survey Trust: Empirical Evidence from Cameroon," Working Papers 0808, University of Otago, Department of Economics, revised Oct 2008.
  6. Obare, Gideon A. & Mwakubo, Samuel M. & Ouma, Emily Awuor & Mohammed, Lutta & Omiti, John M., 2004. "Social Capital and Soil Erosion Control in Agriculturally Marginal Areas of Kenya: The Case of Machakos and Taita-Taveta Districts," 2004 Inaugural Symposium, December 6-8, 2004, Nairobi, Kenya 9532, African Association of Agricultural Economists (AAAE).
  7. Dercon, Stefan & Hoddinott, John & Krishnan, Pramila & Woldehannnam, Tassew, 2008. "Collective action and vulnerability: Burial societies in rural Ethiopia," CAPRi working papers 83, International Food Policy Research Institute (IFPRI).

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