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Abstract
The goal of this paper is to determine the nature of the causal relationship between
"social capital," as measured by household membership in formal and informal groups
and household welfare in South Africa. Using a recently collected panel data set in South
Africa's largest province, we estimate per capita expenditure functions and find a positive
and significant impact of household-level social capital. For example, after controlling
for fixed effects, social capital has no impact on per capita expenditure in 1993 but
positive and significant effects in 1998. We interpret this as reflecting structural changes
in the South African economy as it removes the many restrictions that underlay apartheid.