Essays on Development and Behavioral Economics: Examining the Interplay Between Shocks, Social Capital, Trust, and Prosocial Attitudes
No Thumbnail Available
Date
2025-11-03
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
The literature is unclear whether social capital can insure effectively against shocks. We provide
evidence from rural Ethiopia, a setting characterized by prevalent shocks, lack of formal insurance
markets, and functioning informal traditional institutions, using four waves of household panel
surveys with over 6000 observations. We measure social capital as the social network -based
resources available to rural households via local informal institutions, alternatively measured as
network size, network diversity, and simple membership in institutions. Fixed effect estimation
results show that the buffering role of social capital extends beyond insurance against
idiosyncratic shocks, with variation across welfare and social capital measures. Social capital
helps protect against multiple and simultaneous shocks, buffering shortfalls in not only total
consumption but also food and consumables consumption. Rural households thus benefit from
informal insurance in local institutions in the absence of formal insurance markets. Rural
insurance policies and efforts to address food insecurity and rural development challenges should
consider resources embedded in these institutions.
Keywords: Social capital, social network, Local informal institution, informal insurance, shock