Economic Returns to Social Capital in the Urban Informal Sector in Developing Countries: Micro Evidence from Small Textile Producers in Bolivia
The paper uses micro-level data obtained from surveying informal and formal small textile producers in Bolivia to estimate the economic returns to social capital. Social capital is defined as being linked to other individuals. The paper studies forms of social links that vary with respect to their inclusiveness and their ability to enforce cooperation. The paper shows, first, that social capital has an economic return for informal firms but not for formal ones. Informal firms operate without the shadow of courts in an environment that is characterized by a lack of anonymous trust which makes self-enforcing social links valuable. Second, more inclusive social capital generates a higher return as long as the self-enforcement constraint is met. The evidence supports the hypothesis that the “strength of weak ties”- argument advanced by scholars such as Granovetter, Putnam, and Fukuyama has to be complemented by the game-theoretic condition requiring exchange among linked players to be (self)-enforceable.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
- Kurt Annen, 2001. "Inclusive and Exclusive Social Capital in the Small-Firm Sector in Developing Countries," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(2), pages 319-, June.
- Marcel Fafchamps & Bart Minten, 2000.
"Returns to Social Network Capital among Traders,"
Development Working Papers
145, Centro Studi Luca d'Agliano, University of Milano.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
NBER Working Papers
7771, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
- Annen, Kurt, 2003. "Social capital, inclusive networks, and economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 50(4), pages 449-463, April.
- Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
- 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.
- Simon Johnson & John McMillan & Christopher Woodruff, 1999.
"Contract Enforcement in Transition,"
CESifo Working Paper Series
211, CESifo Group Munich.
- Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
- McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 637-58, October.
- Woodruff, Christopher, 1998. "Contract enforcement and trade liberalization in Mexico's footwear industry," World Development, Elsevier, vol. 26(6), pages 979-991, June.
- Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
- Eliana La Ferrara, 2003.
"Kin Groups and Reciprocity: A Model of Credit Transactions in Ghana,"
American Economic Review,
American Economic Association, vol. 93(5), pages 1730-1751, December.
- La Ferrara, Eliana, 2003. "Kin Groups and Reciprocity: A Model of Credit Transactions in Ghana," CEPR Discussion Papers 3705, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0511011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.