Does Social Capital Matter? Evidence from a Five-Country Group Lending Experiment

Authors: Alessandra Cassar and Bruce Wydick, February 2008

Abstract: Does social capital matter to economic decision-making? We address this broad question through an artefactual group lending experiment carried out in five countries: India, Kenya, Guatemala, Armenia, and the Philippines. From these experiments we obtain data on 10,662 contribution decisions on simulated group loans from 1,554 participants in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and self-selection. Our results show the influence of different types of social capital to vary depending on context, and that certain treatments, such as peer monitoring, can have perverse as well as beneficial effects on group performance. We also distinguish between spiritual capital and social capital among Christian, Hindu, and Muslim groups in our five countries, finding modest evidence for the effect of spiritual capital on individual repayment performance, controlling for the influence of religion on social capital.

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