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Social Capital Formation in an Imperfect Credit Market

Author

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

Abstract

This study uses a unique long panel dataset from Sri Lanka to examine the mechanism of social capital formation in an imperfect credit market. The authors show that households in the face of credit constraints reduce the time allocation for social capital investment, such as participation in community works. The paper also finds that temporal declines in social capital investment persistently reduce the level of trust in the community. These findings imply the existence of a poverty trap, because the absence of a credit market access generates poor social capital which, in turn, leads to poor access to the informal credit market, causing further credit constraints.

Suggested Citation

  • Shoji, Masahiro & Aoyagi, Keitaro & Kasahara, Ryuji & Sawada, Yasuyuki & Ueyama, Mika, 2010. "Social Capital Formation in an Imperfect Credit Market," Working Papers 3, JICA Research Institute.
    • Handle: RePEc:jic:wpaper:3
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    File URL: http://hdl.handle.net/10685/58
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    References listed on IDEAS

    as
    1. Shoji, Masahiro & Aoyagi, Keitaro & Kasahara, Ryuji & Sawada, Yasuyuki, 2010. "Motives behind Community Participation," Working Papers 16, JICA Research Institute.
    2. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    3. Kerwin Kofi Charles & Patrick Kline, 2006. "Relational Costs and the Production of Social Capital: Evidence from Carpooling," Economic Journal, Royal Economic Society, vol. 116(511), pages 581-604, April.
    4. 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.
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    Cited by:

    1. Yasuyuki Sawada & Ryuji Kasahara & Keitaro Aoyagi & Masahiro Shoji & Mika Ueyama, 2013. "Modes of Collective Action in Village Economies: Evidence from Natural and Artefactual Field Experiments in a Developing Country," Asian Development Review, MIT Press, vol. 30(1), pages 31-51, March.

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