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Does social capital matter? Evidence from a five-country group lending experiment

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  • Alessandra Cassar
  • Bruce Wydick

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, obtaining data on 10,673 contribution decisions from 1,554 subjects in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and borrowing group self-selection. Results show that societal trust positively and significantly influences group loan contribution rates, that group lending appears to create as well as harness social capital, and that peer monitoring can have perverse as well as beneficial effects. Copyright 2010 Oxford University Press 2010 All rights reserved, Oxford University Press.

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  • Alessandra Cassar & Bruce Wydick, 2010. "Does social capital matter? Evidence from a five-country group lending experiment," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 715-739, October.
    • Handle: RePEc:oup:oxecpp:v:62:y:2010:i:4:p:715-739
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    File URL: http://hdl.handle.net/10.1093/oep/gpq010
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