Local Institutions, Poverty, and Household Welfare in Bolivia

The authors empirically estimate the
impact of social capital on household welfare in
Bolivia--where they found 67 different types of local
associations. They focus on household memberships in local
associations as being especially relevant to daily decisions
that affect household welfare and consumption. On average,
households belong to 1.4 groups and associations: 62 percent
belong to agrarian syndicates, 16 percent to production
groups, 13 percent to social service groups, and 10 percent
to education and health groups. Smaller numbers belong to
religious and government groups. Agrarian syndicates,
created by government decree in 1952, are now viewed mainly
as community-initiated institutions to manage conmunal
resources. They have been registered as legal entities to
work closely with municipalities to represent the interests
and priorities of local people in municipal decisionmaking.
The effects of social capital operate through (at least)
three mechanisms: sharing of information among association
members; the reduction of opportunistic behavior; and better
collective decisionmaking. The effect of social capital on
household welfare was found to be 2.5 times that of human
capital. Increasing the average educational endowment of
each adult in the household by one year (about a 2.5-percent
increase) would increase per capita household spending 4.2
percent; a similar increase in the social capital endowment
would increase spending 9 to 10.5 percent. They measured
social capital along six dimensions: density of memberships,
internal heterogeneity of associations (by gender, age,
education, religion, etc.), meeting attendance, active
participation in decisionmaking, payment of dues (in cash
and in kind), and community orientation. The strongest
effect came from number of memberships. Active membership in
an agrarian syndicate is associated with an average 11.5
percent increase in household spending. Membership in
another local association is associated with a 5.3-percent
higher spending level. Empirical results partly confirm the
hypothesis that social capital provides long-term benefits
such as better access to credit and a higher level of trust
in the community as a source of assistance in case of need.