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Social capital, houshold welfare, and poverty in Indonesia

Author

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  • Grootaert, Christiaan

Abstract

The author empirically estimates how social capital affects household welfare and poverty in Indonesia. His focus: household memberships in local associations, an aspect of social capital especially relevant to daily household decisions that affect welfare and consumption. The data suggest that households with higher social capital spend more per capita. They also have more assets, more savings, and better access to credit. To estimate how social capital contributes to household welfare, the author uses a reduced-form model of household welfare, which controls for relevant household and location characteristics. He measures social capital along six dimensions: density of memberships, internal heterogeneity of associations (by age, gender, education, religion, and so on), meeting attendance, active participation in decision-making, payment of dues, and community orientation. The strongest effects come from: A) Number of memberships. Each additional membership (an average of 20 percent increase) raises per capita household spending 1.5 percent. B) Internal heterogeneity. An increase of 20 percent in the heterogeneity index correlates with 3.3 percent more spending. C) Active participation in decision making. An increase of 20 percent in the participation index correlates with 3.2 percent more spending. The author also estimates structural equations and uses instrumental variable estimation and historical data to address the possible endogeneity of the social capital variable and to demonstrate that the causality runs from social capital to household welfare.

Suggested Citation

  • Grootaert, Christiaan, 1999. "Social capital, houshold welfare, and poverty in Indonesia," Policy Research Working Paper Series 2148, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2148
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. I Jones & C.M Nyland & M.G Pollitt, 2001. "How do Multinationals Build Social Capital? Evidence from South Africa," Working Papers wp220, Centre for Business Research, University of Cambridge.
    2. Jonathan Isham, 2002. "Social Capital and Consumption among Agricultural Households," Middlebury College Working Paper Series 0202, Middlebury College, Department of Economics.
    3. repec:pje:journl:article14winiv is not listed on IDEAS
    4. Ian W. Jones & Chris M. Nyland & Michael G. Pollitt, 2004. "Multinationals in Developing Communities: how EU Multinationals build Social Capital in Poland," Working Papers wp285, Centre for Business Research, University of Cambridge.
    5. Miguel, Edward A. & Gertler, Paul & Levine, David I., 2003. "Did Industrialization Destroy Social Capital in Indonesia?," Center for International and Development Economics Research, Working Paper Series qt9kt2m860, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    6. Sujarwoto, Sujarwoto & Tampubolon, Gindo, 2013. "Mother's social capital and child health in Indonesia," Social Science & Medicine, Elsevier, vol. 91(C), pages 1-9.
    7. Patrick, Ian & Marshall, Graham R. & Abdurrahman, Muktasam & Ambarawati, I Gusti Agung Ayu, 2006. "Determining the Role of Social Capital in Linking Smallholders with Agribusiness," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139890, Australian Agricultural and Resource Economics Society.
    8. Coady, David & Xinyi Dai & Limin Wang, 2001. "Community programs and women's participation : the Chinese experience," Policy Research Working Paper Series 2622, The World Bank.
    9. Mariano Nieto & Nuria González-Álvarez, 2016. "Social capital effects on the discovery and exploitation of entrepreneurial opportunities," International Entrepreneurship and Management Journal, Springer, vol. 12(2), pages 507-530, June.
    10. Zhang, Yanlong & Zhou, Xiaoyu & Lei, Wei, 2017. "Social Capital and Its Contingent Value in Poverty Reduction: Evidence from Western China," World Development, Elsevier, vol. 93(C), pages 350-361.
    11. Jonathan Isham, 2002. "The Effect of Social Capital on Fertiliser Adoption: Evidence from Rural Tanzania," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(1), pages 39-60, March.
    12. Jarita DUASA, "undated". "The Effectiveness of Malaysian Capital Outflow Controls of 1998," EcoMod2004 330600044, EcoMod.
    13. Hvid, Anna Kirstine & Henningsen, Geraldine Adrienne, 2014. "A new scramble for land or an unprecedented opportunity for the rural poor? Distributional consequences of increasing land rents in developing countries," MPRA Paper 52919, University Library of Munich, Germany.

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