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Social Capital, Network Effects and Savings in Rural Vietnam

  • Newman, Carol
  • Tarp, Finn
  • van den Broeck, Katleen

Information failures are a major barrier to formal financial saving in low income countries. Households in rural communities often lack the information necessary to set up formal deposit accounts or are uncertain about the returns to saving formally. In this paper, we explore the extent to which social networks in rural Vietnam can play a role in increasing formal savings where knowledge gaps exist. Networks are defined as active membership of women´s unions and the quality of networks is measured by the level of formal savings observed among group members. We find that membership of high quality networks leads to higher levels of saving in formal financial institutions and to higher levels of saving for productive investments as compared with other precautionary or lifecycle motives. Our results suggest that transmitting financial information through formal networks could be effective in increasing formal savings at grassroots level. We also conclude that ensuring information disseminated by networks is both accurate and desirable as well as important given that behavioural effects are also found in low-quality networks.

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File URL: https://www.wider.unu.edu/sites/default/files/wp2012-39.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper WP2012/039.

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Length: 25
Date of creation: 2012
Date of revision:
Handle: RePEc:unu:wpaper:wp2012-39
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  1. repec:dau:papers:123456789/4392 is not listed on IDEAS
  2. Robert M. Townsend & Shawn Cole & Jeremy Tobacman & Xavier Gine & James Ian Vickery & Petia Topalova, 2012. "Barriers to Household Risk Management; Evidence from India," IMF Working Papers 12/195, International Monetary Fund.
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  5. Carol Newman & Fiona Wainwright, 2011. "Income Shocks and Household Risk-Coping Strategies: Evidence from Rural Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp358, IIIS.
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  8. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
  9. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
  10. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  11. Timothy Conley & Udry Christopher, 2001. "Social Learning Through Networks: The Adoption of New Agricultural Technologies in Ghana," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 668-673.
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