Making rural households’ livelihoods more resilient. The importance of social capital and the underlying social networks.

Although interest in the structure and relational features of social capital and its underlying networks has grown since the early 1990s, the terms do not embody any ideas that are really new to sociologists, but are indeed rather new to economists. Until the 1950s, land, labour, and financial capital (i.e., levels of investment) were seen as being relevant for economic growth. Then technology (physical capital) was added to the list. In the early 1960s, convincing empirical evidence showed that labour without know-how and entrepreneurial skills (human capital) limit the potential of the other production factors. Today, labour and skills are usually simultaneously addressed when talking of human capital. In development economics, and more recently in main-stream and transition economics, social capital is more and more considered an important capital asset for the welfare of individuals and communities. Already in the early 1990s, development economics postulated the so-called capital asset pentagon that comprises the mainstream economic production factors, as well as social capital (see figure below). The potential of compensating the lack of one capital asset with the existence of another was seen as important for maintaining a sustainable livelihood. It is also important to note that human capital resides in individuals and social capital in relationships (WOOLCOCK, 2001). As literate and informed people are better able to organize, evaluate and transform information, human and social capital assets are complements. In addition, social capital can supplement meagre levels of other capital assets. Capital asset pentagon of the sustainable livelihood framework: During the transformation process of transition countries in the 1990s, the tremendous institutional changes and breakdowns in the public and private sectors further accelerated interest in social capital. Public service institutions such as kindergartens or farm extension services were closed and rural communities with social capital could compensate for this by collective actions. The emergence of a relatively flourishing microfinance sector in urban and rural areas is proof of the power of tapping social networks when public and private banks refrain from servicing the poorer segments of the population. This edited volume tries to bring together academics in Germany who have an outspoken interest in conducting research on social capital and the underlying network in a rural context. The volume starts out with two conceptual and methodological contributions, one by BUCHENRIEDER and DUFHUES and another by BUCHENRIEDER, which pave the way for a better understanding of the empirical contributions. The contributions by DUFHUES and BUCHENRIEDER and WOLZ, FRITZSCH and REINSBERG discuss methodological issues to operationalise social capital as a parameter in econometric analyses. While DUFHUES and BUCHENRIEDER address the issue based on interpersonal relationships and propose methods to model networks, WOLZ, FRITZSCH and REINSBERG construct a factor from the observance of structured social capital in rural areas of the Czech Republic. They find that some forms of structured social capital contribute to total farm output. In this sense, social capital drives total factor productivity, which is in line with what DASGUPTA (2002) claimed, and can be considered a new production factor. KASARJYAN and KORFF use a networkcentred approach to assess the effects of strong and weak ties on having access to rural microcredit in Armenia in a situation where the formal financial market fails. Interestingly, it is mostly bonding social capital that determines access. Clearly, as the rural financial market develops in Armenia, access to rural credit has to go beyond family and friendship ties. Finally, BEUCHELT and FISCHER describe how rural households in Vietnam manage risk based on their five capital assets. Normally, financial, physical and natural capital assets are already stretched to their limits and it is the social capital that has to be called upon when an income shock hits. However, social capital is more developed in the better-off households than in the very poor households. Therefore, it can be concluded from the empirical contributions in this volume that access to social capital is not a panacea for rural economic development under difficult societal, economic and political conditions. Nevertheless, interpersonal networks of social capital can help to ease socio-economic hardship when the state and market fail to do their share.

Buchenrieder, Gertrud
Dufhues, Thomas
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Book/ Chapter
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ISSN 1436-221X ISBN 3-938584-13-0 (Other)
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Studies on the Agricultural and Food Sector in Central and Eastern Europe

 Record created 2017-04-01, last modified 2017-08-25

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