Social Capital and Its Contingent Value in Poverty Reduction: Evidence from Western China

Previous literature suggests that social capital at the individual and community levels can contribute significantly to poverty reduction. In this paper we empirically investigate the relationship between social capital and households’ probability of living under poverty. We used a large-scale cross-sectional survey in western Chinese provinces to explore the impact of households’ social capital on four different poverty measures. Our results indicate that in addition to the structural and relational properties of households’ social networks, the types of resources embedded in these networks such as business ties, political ties, and appropriable social organizations can contribute significantly to poverty reduction. Moreover, since our study is situated in China’s emerging economy context, we can thus further explore how variations in macrolevel institutions affect the usefulness of various social resources in reducing poverty. We discovered that the quality of local institutions as measured by local residents’ trust toward the institutions can modulate the effectiveness of political ties and appropriable social organizations, such that the impacts of political ties and appropriable social organizations tend to diminish in communities with higher level of institutional trust than they are in communities with lower level of institutional trust, while business ties turn out to be effective in alleviating poverty in both high- and low-trust communities.