Valuation Study

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Social Capital Erosion


Medium: Health and/or Human Capital

Country: China

Analytical Framework(s): Other

Study Date: 2008

Publication Date: 2009

Major Result(s)

Study Note: This empirical paper aimed to understand the determinants of social capital with specific focus on the effect of individuals' bonding social capital and bridging social capital. The research design was inspired by the research of Croson and Buchan (1999), Glaeser and Laibson (2000), Barr (2003), Karlan (2005), and Schechter (2007). It combined field experiments and surveys to measure trust and analyze the determinants of trust/trustworthiness among people in rural community settings where members have real interactions in their daily lives.

Study Details

Reference: Yazhen Gong. 2009. Social Connections, Networks, and Social Capital Erosion: Evidence from Surveys and Field Experiments. EEPSEA Research Report, No. 2009-RR11.

Summary: Measuring trust, a cognitive social capital that can significantly affect cooperation among individuals and groups to take collective actions for joint benefits, is an important empirical research. This paper explored the methods of measuring trust and identified the determining factors affecting trust/trustworthiness among village members in southwestern China's Yunnan Province. To gather information, we surveyed 600 farmers in 30 administrative villages, conducted focus group discussions, and administered an experiment (e.g., trust game) among respondents in six counties. We also conducted trust games using the 600 respondents as subjects of the experiments, 300 playing the role of senders and 300 playing the role of receivers in a trust game. Results showed that education level could positively and significantly predict both players' (Player 1 was sender and Player 2 was receiver) behaviors. Moreover, percentage of expenditure on gift exchange in Player 1's total family expenditure and trust measured by the survey method were robust to the model's specifications and could significantly predict the sender's behavior in the trust game. Meanwhile, there was no significant evidence that the trust could predict the receiver's behavior. The village's openness to the market and outside world also negatively and significantly predicted both players' behaviors. Further, the receiver's family participation in closed vs. open networks had an opposite impact on the receiver's behavior in the trust game. Hence, social connection variables could play more important roles than individual demographic characteristics in interactions that involve social capital. However, social capital could be eroded when the villages become more open to the outside world and when informal institutions are gradually substituted by modern formal institutions. Overall, with careful study designs, the survey and field experimental methods could complement each other in measuring trust and trustworthiness.

Site Characteristics: Trust games and household surveys were conducted in 30 villages in the rural Yunnan Province of Southwestern China. Results of the trust games were used to measure the outcomes of the individuals' social capital. The individuals' bonding and bridging social capital were measured by: (1] their social connections in their villages, (2) their participation in different types of social networks, (3) their stated trust/trustworthiness, and (4) the openness of the surveyed village to the market. All the above measurements were used as major variables in econometric models to analyze their effect on the outcomes from the trust games.

Comments: Questionnaire surveys and trust games were conducted in each randomly selected village in rural Yunnan Province of Southwest China. A total of 30 administrative villages from five counties in Yunnan were chosen. In each village, two natural villages (the sub-unit of the administrative villages) were randomly chosen. In each natural village, 10 respondents were randomly chosen. In total, there were 600 respondents surveyed. Subjects for the trust games were the respondents of the surveys. For the trust game, the two natural villages selected from the same administrative village were randomly divided into two groups: 10 subjects from one natural village playing the role of senders and 10 subjects from another natural village playing the role of receivers. As a result, 300 subjects from 30 natural villages played the role of senders and 300 subjects from 30 natural villages played the role of receivers.