Social Capital and Poverty in India

Abstract

This paper is a motivated by the need to expand research on social capital and its effects on poverty. Studies of social capital and its economic payoffs have tended to focus on industrialised countries, whilst those studies which have focused on developing countries have been based on micro level survey data. This paper therefore addresses the need to look at social capital at the wider macro level while examining the impact of social capital on poverty. The paper focuses on poverty at the state level in India and asks the question: have those states with larger endowments of social capital been more successful at reducing poverty? In order to answer this question an econometric model of poverty is constructed that not only captures the effects of physical and human capital, but also includes social capital as a determinant of poverty. The paper concludes that there is some evidence to support the hypothesis that a state’s endowment of social capital does affect the ability of that state to reduce poverty.