Social capital, houshold welfare, and poverty in Indonesia

Christiaan Grootaert

No 2148, Policy Research Working Paper Series from The World Bank

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.

Keywords: Public Health Promotion; Capital Markets and Capital Flows; Decentralization; Social Capital; Economic Theory&Research; Economic Theory&Research; Health Economics&Finance; Community Development and Empowerment; Poverty Assessment; Social Capital (search for similar items in EconPapers)
Date: 1999-07-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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