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Social Network Capital, Economic Mobility and Poverty Traps

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  • Chantarat, Sommarat
  • Barrett, Christopher B.

Abstract

The paper explores the role social network capital might play in facilitating poor agents’ escape from poverty traps. We model endogenous network formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can serve as either a complement to or a substitute for productive assets in facilitating some poor households’ escape from poverty. However, the voluntary nature of costly social network formation also creates both involuntary and voluntary exclusionary mechanisms that impede some poor households’ efforts to exit poverty. The ameliorative potential of social networks therefore depends fundamentally on the underlying wealth distribution in the economy. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty.

Suggested Citation

  • Chantarat, Sommarat & Barrett, Christopher B., 2007. "Social Network Capital, Economic Mobility and Poverty Traps," MPRA Paper 1947, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1947
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    Cited by:

    1. Jaramillo, Fernando & Kempf, Hubert & Moizeau, Fabien, 2015. "Heterogeneity and the formation of risk-sharing coalitions," Journal of Development Economics, Elsevier, vol. 114(C), pages 79-96.
    2. Christopher B. Barrett & Michael R. Carter & Jean-Paul Chavas, 2017. "Introduction to "The Economics of Poverty Traps"," NBER Chapters, in: The Economics of Poverty Traps, pages 1-20, National Bureau of Economic Research, Inc.
    3. Anandi Mani & Emma Riley, 2019. "Social networks, role models, peer effects, and aspirations," WIDER Working Paper Series wp-2019-120, World Institute for Development Economic Research (UNU-WIDER).
    4. Sonia Di Giannatale & Alexander Elbittar & Patricia López-Rodríguez & María-José Roa-García, 2013. "Trust, Information Acquisition and Financial Decisions: A Field Experiment," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 375-401, July-Dece.
    5. Francesco Farina, 2015. "Development theory and poverty. A review," Working Papers 46-2015, Macerata University, Department of Studies on Economic Development (DiSSE), revised Jan 2015.
    6. Cristiano Codagnone & Francesco Bogliacino & Camilo Gómez & Frans Folkvord & Giovanni Liva & Rafael Charris & Felipe Montealegre & Francisco Lupiañez Villanueva & Giuseppe A. Veltri, 2021. "Restarting “Normal” Life after Covid-19 and the Lockdown: Evidence from Spain, the United Kingdom, and Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(1), pages 241-265, November.
    7. Di Giannatale, Sonia & Roa, María José, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 8107, Inter-American Development Bank.
    8. Yi Cai & Chunping Xia, 2018. "Interpretive Structural Analysis of Interrelationships among the Elements of Characteristic Agriculture Development in Chinese Rural Poverty Alleviation," Sustainability, MDPI, vol. 10(3), pages 1-19, March.
    9. Emma Baker & Andrew Beer & Laurence Lester & David Pevalin & Christine Whitehead & Rebecca Bentley, 2017. "Is Housing a Health Insult?," IJERPH, MDPI, vol. 14(6), pages 1-18, May.
    10. Suxia Li & Meng Cai, 2024. "Social support and reference group: the dual action mechanism of the social network on subjective poverty," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    11. Lyndon Walker & Peter Davis, 2013. "Modelling "Marriage Markets": A Population-Scale Implementation and Parameter Test," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 16(1), pages 1-6.
    12. Tiago V. V. Cavalcanti & Chryssi Giannitsarou, 2017. "Growth and Human Capital: A Network Approach," Economic Journal, Royal Economic Society, vol. 127(603), pages 1279-1317, August.
    13. Jia, Xiangping, 2009. "Synergistic Green and White Revolution: Evidence from Kenya and Uganda," 2009 Conference, August 16-22, 2009, Beijing, China 51367, International Association of Agricultural Economists.
    14. Ivica Petrikova, 2022. "The Effects of Local-Level Economic Inequality on Social Capital: Evidence from Andhra Pradesh, India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2850-2877, December.
    15. Luan, Bingjiang & Zou, Hong & Huang, Junbing, 2023. "Digital divide and household energy poverty in China," Energy Economics, Elsevier, vol. 119(C).
    16. Zhaohui Chong & Chenglin Qin & Xinyue Ye, 2016. "Environmental Regulation, Economic Network and Sustainable Growth of Urban Agglomerations in China," Sustainability, MDPI, vol. 8(5), pages 1-21, May.
    17. Chen, Siwei & Liu, Chengfang & Huang, Jikun & Zhi, Huayong, 2023. "Can social capital facilitate households' donations in rural China?," China Economic Review, Elsevier, vol. 81(C).
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    20. repec:dau:papers:123456789/11437 is not listed on IDEAS
    21. Sonia Di Giannatale & María José Roa, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 97397, Inter-American Development Bank.
    22. Patacchini, Eleonora & Barrett, Christopher & , & Walker, Thomas, 2019. "Altruism, Insurance, And Costly Solidarity Commitments1," CEPR Discussion Papers 14148, C.E.P.R. Discussion Papers.
    23. Wang, Li & Liu, Lihua & Dai, Yunhao, 2021. "Owning your future: Entrepreneurship and the prospects of upward mobility in China," Economic Modelling, Elsevier, vol. 104(C).

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    More about this item

    Keywords

    social network capital; endogenous network formation; poverty traps; multiple equilibria; social isolation; social exclusion; crowding-in transfer;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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