Social and Behavioral Sciences Commons^™

Does Social Capital Matter? Evidence From A Five-Country Group Lending Experiment, Alessandra Cassar, Bruce Wydick

Economics

Does social capital matter to economic decision-making? We address this broad question through an artefactual group lending experiment carried out in five countries: India, Kenya, Guatemala, Armenia, and the Philippines, obtaining data from 10,673 contribution decisions on simulated group loans from 1,554 participants in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and group self-selection. Results show that societal trust has a positive and significant impact on group loan contribution rates, that group lending appears to create as well as harness social capital, and that peer monitoring can have perverse as well as beneficial effects.