The Role of Community and Individuals in the Formation of Social Capital

Abstract

Because social capital shapes many desirable socioeconomic outcomes, we ask what incentives drive private investments in social capital. We estimate the association between private investments in social capital (outcome variable) and the following explanatory variables: (a) individual-level variables from an optimal investment model, (b) spillovers from group social capital, (c) village income inequality, and (d) market openness. We draw on information from Tsimane’, a native Amazonian society of foragers and farmers in Bolivia, and equate social capital with gifts, help given, and communal labor offered by the household. Age bore an inverted U-shaped and income bore a positive association with social capital, but geographic mobility, wealth, and schooling bore no significant association with social capital. We found strong group-level associations even after instrumenting social capital; the association probably stems from strong kinship ties which tend to blur the line between the group and the individual. Village measures of social capital were positively and significantly associated with private investments in social capital. We found some evidence that village income inequality and market openness were negatively associated with private investments in social capital.