Does Social Capital Matter? Evidence from a Five-Country Group Lending Experiment
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 10,673 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 contribution rates differing substantially between countries, the influence of different types of social capital to vary depending on context, that group lending appears to create as well as harness social capital, and that 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 mild evidence for the effect of spiritual capital on borrowing group performance.
Keywords: Social Capital, Artefactual Field Experiment, Microfinance
Dr. Alessandra Cassar
Assistant Professor, Department of Economics, University of San Francisco
Dr. Bruce Wydick
Professor, Department of Economics, University of San Francisco