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Social network capital, economic mobility and poverty traps

Author

Listed:
  • Sommarat Chantarat
  • Christopher Barrett
Abstract
This paper explores the role social network capital might play in facilitating poor agents’ escape from poverty traps. We model and simulate endogenous link formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can either complement or substitute for productive assets in facilitating some poor households’ escape from poverty. However, the voluntary nature of costly link formation also creates exclusionary mechanisms that impede some poor households’ use of social network capital. Through numerical simulation, we show that the ameliorative potential of social networks therefore depends fundamentally on the broader socio-economic wealth distribution in the economy, which determines the feasibility of social interactions and the net intertemporal benefits resulting from endogenous network formation. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty. Copyright Springer Science+Business Media, LLC. 2012

Suggested Citation

  • Sommarat Chantarat & Christopher Barrett, 2012. "Social network capital, economic mobility and poverty traps," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(3), pages 299-342, September.
    • Handle: RePEc:kap:jecinq:v:10:y:2012:i:3:p:299-342
    DOI: 10.1007/s10888-011-9164-5
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    Cited by:

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    2. Jaramillo, Fernando & Kempf, Hubert & Moizeau, Fabien, 2015. "Heterogeneity and the formation of risk-sharing coalitions," Journal of Development Economics, Elsevier, vol. 114(C), pages 79-96.
    3. Christopher B. Barrett & Michael R. Carter & Jean-Paul Chavas, 2017. "Introduction to "The Economics of Poverty Traps"," NBER Chapters, in: The Economics of Poverty Traps, pages 1-20, National Bureau of Economic Research, Inc.
    4. Sinyolo, Sikhulumile & Mudhara, Maxwell, 2018. "Collective action and rural poverty reduction: Empirical evidence from KwaZulu-Natal, South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 57(1), April.
    5. Anandi Mani & Emma Riley, 2019. "Social networks, role models, peer effects, and aspirations," WIDER Working Paper Series wp-2019-120, World Institute for Development Economic Research (UNU-WIDER).
    6. Patacchini, Eleonora & Barrett, Christopher & , & Walker, Thomas, 2019. "Altruism, Insurance, And Costly Solidarity Commitments1," CEPR Discussion Papers 14148, C.E.P.R. Discussion Papers.
    7. Lyndon Walker & Peter Davis, 2013. "Modelling "Marriage Markets": A Population-Scale Implementation and Parameter Test," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 16(1), pages 1-6.
    8. Sonia Di Giannatale & Alexander Elbittar & Patricia López-Rodríguez & María-José Roa-García, 2013. "Trust, Information Acquisition and Financial Decisions: A Field Experiment," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 375-401, July-Dece.
    9. Tiago V. V. Cavalcanti & Chryssi Giannitsarou, 2017. "Growth and Human Capital: A Network Approach," Economic Journal, Royal Economic Society, vol. 127(603), pages 1279-1317, August.
    10. Zhaohui Chong & Chenglin Qin & Xinyue Ye, 2016. "Environmental Regulation, Economic Network and Sustainable Growth of Urban Agglomerations in China," Sustainability, MDPI, vol. 8(5), pages 1-21, May.
    11. Francesco Farina, 2015. "Development theory and poverty. A review," Working Papers 46-2015, Macerata University, Department of Studies on Economic Development (DiSSE), revised Jan 2015.
    12. Jia, Xiangping, 2009. "Synergistic Green and White Revolution: Evidence from Kenya and Uganda," 2009 Conference, August 16-22, 2009, Beijing, China 51367, International Association of Agricultural Economists.
    13. Wang, Li & Liu, Lihua & Dai, Yunhao, 2021. "Owning your future: Entrepreneurship and the prospects of upward mobility in China," Economic Modelling, Elsevier, vol. 104(C).
    14. Chen, Siwei & Liu, Chengfang & Huang, Jikun & Zhi, Huayong, 2023. "Can social capital facilitate households' donations in rural China?," China Economic Review, Elsevier, vol. 81(C).
    15. Cristiano Codagnone & Francesco Bogliacino & Camilo Gómez & Frans Folkvord & Giovanni Liva & Rafael Charris & Felipe Montealegre & Francisco Lupiañez Villanueva & Giuseppe A. Veltri, 2021. "Restarting “Normal” Life after Covid-19 and the Lockdown: Evidence from Spain, the United Kingdom, and Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(1), pages 241-265, November.
    16. Di Giannatale, Sonia & Roa, María José, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 8107, Inter-American Development Bank.
    17. Bhattamishra, Ruchira & Barrett, Christopher B., 2010. "Community-Based Risk Management Arrangements: A Review," World Development, Elsevier, vol. 38(7), pages 923-932, July.
    18. Ivica Petrikova, 2022. "The Effects of Local-Level Economic Inequality on Social Capital: Evidence from Andhra Pradesh, India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2850-2877, December.
    19. Yi Cai & Chunping Xia, 2018. "Interpretive Structural Analysis of Interrelationships among the Elements of Characteristic Agriculture Development in Chinese Rural Poverty Alleviation," Sustainability, MDPI, vol. 10(3), pages 1-19, March.
    20. Luan, Bingjiang & Zou, Hong & Huang, Junbing, 2023. "Digital divide and household energy poverty in China," Energy Economics, Elsevier, vol. 119(C).
    21. repec:hal:pseose:halshs-01075648 is not listed on IDEAS
    22. Emma Baker & Andrew Beer & Laurence Lester & David Pevalin & Christine Whitehead & Rebecca Bentley, 2017. "Is Housing a Health Insult?," IJERPH, MDPI, vol. 14(6), pages 1-18, May.
    23. repec:dau:papers:123456789/11437 is not listed on IDEAS
    24. Sonia Di Giannatale & María José Roa, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 97397, Inter-American Development Bank.

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    More about this item

    Keywords

    Social network capital; Endogenous network formation; Poverty traps; Multiple equilibria; Social isolation; Social exclusion; Crowding-in transfer; D85; I32; O12; Z13;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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