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Social Capital And Economic Development In A Large Multi-Ethnic Developing Country: Evidence From Indonesia

Author

Listed:
  • Asep Suryahadi
  • Arnita Rishanty
  • Robert Sparrow
Abstract
The role of social capital in economic development has been a subject of interest to both academics and practitioners of development for several decades. However, studies on social capital in developing countries context is still rare. This study explores empirically the relationships between social capital and economic development at district level in Indonesia.We find that the effects of social capital on economic development are complex. Hence, we cannot simply say that social capital is either good or bad for development. The relationships differ across development indicators, the forms of social capital, and the categories within each form of social capital. Nevertheless, the most important finding of this study indicates that trust among people across different ethnic groups is the most important social capital for Indonesia. Higher trust among ethnic groups reduces poverty, increases income per capita, and increases consumption per capita of all segments of the population. Since Indonesia hashighly diverse ethnic groups, maintaining trust among these ethnic groups is paramount to the success of economic development of the country.

Suggested Citation

  • Asep Suryahadi & Arnita Rishanty & Robert Sparrow, 2020. "Social Capital And Economic Development In A Large Multi-Ethnic Developing Country: Evidence From Indonesia," Working Papers WP/04/2020, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp042020
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    References listed on IDEAS

    as
    1. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    2. Wenefrida Dwi Widyanti & Asep Suryahadi, "undated". "The State of Local Governance and Public Services in the Decentralized Indonesia in 2006: Findings from the Governance and Decentralization Survey 2 (GDS2)," Working Papers 634, Publications Department.
    3. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    4. Cleaver, Frances, 2005. "The inequality of social capital and the reproduction of chronic poverty," World Development, Elsevier, vol. 33(6), pages 893-906, June.
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    Cited by:

    1. Donni Fajar Anugrah & Aryo Sasongko & Wahyoe Soedarmono & Andi Tiara Putri Marasanti, 2023. "Literature Survey: Growth And Stability," Working Papers WP/08/2023, Bank Indonesia.

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    More about this item

    Keywords

    social capital; economic development; trust; Indonesia;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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