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Social Capital and Economic Development in a Large and Multi-Ethnic Developing Country: Evidence from Indonesia

Author

Listed:
  • ASEP SURYAHADI

    (SMERU Research Institute and Bank Indonesia Institute, Jakarta, Indonesia)

  • ARNITA RISHANTY

    (Bank Indonesia Institute, Jakarta, Indonesia)

  • ROBERT SPARROW

    (Wageningen University and Erasmus University, Rotterdam, Netherlands)

Abstract

The role of social capital in economic development has been a subject of interest to both academics and practitioners of development for several decades. However, empirical evidence on social capital in the context of developing countries is still relatively scant. This study explores the effects of social capital on economic development in Indonesia, a large and multi-ethnic developing country. Using district-level data for 2006–2019, we find that the relationships between social capital and economic development are complex. There are both favorable and unfavorable effects of social capital on economic development, as well as nonlinear effects. Hence, we cannot draw unequivocal conclusions on the benefits or disadvantages of social capital for economic development. Nevertheless, this study finds that trust among people across different ethnic groups, participation in communal works and social activities, and trust in government are the most important forms of social capital needed to improve people’s welfare.

Suggested Citation

  • Asep Suryahadi & Arnita Rishanty & Robert Sparrow, 2024. "Social Capital and Economic Development in a Large and Multi-Ethnic Developing Country: Evidence from Indonesia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 41(02), pages 301-323, September.
    • Handle: RePEc:wsi:adrxxx:v:41:y:2024:i:02:n:s0116110524500082
    DOI: 10.1142/S0116110524500082
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    Keywords

    economic development; Indonesia; social capital; trust; welfare;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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