Social capital and household welfare in rural Punjab

Abstract

Social capital is considered as a resource that facilitates cooperation within or between people. It is the glue that holds societies together and without which there can be no economic growth or human well-being. The main objective of this paper is to analyze the impact of social capital on household welfare proxied by monthly per capita expenditure of households in rural areas of three districts of Punjab: Jalandhar, Ludhiana and Muktsar. The study is based on the primary data collected through a well organized questionnaire from 540 households and the data are analyzed by using various statistics and econometrics techniques. Responses from each of the 540 sample households for the fifteen survey questions, grouped into six dimensions of social capital - a) groups and networks, b) trust and solidarity, c) collective action and cooperation, d) information and communication, e) social cohesion and inclusion, and f) empowerment and political action - are added after multiplying with the appropriate weight, and then the resultant score is rescaled from 0 to 100 to construct social capital index. In rural Punjab, mean score for households on the social capital index is 59.90 points out of possible 100 points and the standard deviation is 22.70. The OLS coefficient of the social capital variable shows that a one unit increase in social capital (i.e. 16.09 per cent) would increase household per capita expenditure by 44.5 per cent. Further, the results of the split sample approach show that the returns to the aggregate social capital are significantly higher for poor households than for non-poor. Overall, the results suggest that investment in social capital should be encouraged as a way of further alleviating the poverty of rural households.