Understanding and Measuring Social Capital

Abstract

The Social Capital Initiative (SCI) was launched in 1996 by the World Bank to assess the impact of social capital on the effectiveness of development projects, and to contribute to the development of indicators for monitoring social capital and methodologies for measuring its impact. This chapter describes the approaches, results, and recommendations from this large empirical exercise. It first explores the various dimensions of the concept of social capital: its scope (micro-, meso- and macro- levels), its forms (structural and cognitive) and the channels though which it facilitates development (information sharing, collective action and decisionmaking, and reduction of opportunistic behavior). Next, it presents the debates that surround the use of the term capital to describe the concept. Social capital shares a number of characteristics with other forms of capital (it is an accumulated stock which requires an investment and from which a stream of benefits flow); it also exhibits several attributes that distinguish it from them (it can accumulate as a result of its use, and its creation and activation require more than one person). The chapter then describes the twelve projects funded by the SCI, all of which provide strong evidence that social capital is a pervasive ingredient and determinant of progress in many types of development projects, and an important tool for poverty reduction. The studies show, using quantitative as well as qualitative analytical approaches, that social capital can have a major impact on the income and welfare of the poor by improving the outcome of activities that affect them. In particular, social capital improves the efficiency of rural development programs by increasing agricultural productivity, facilitating the management of common resources, making rural trading more profitable, and energizing farmer federations. It also enhances access of poor households to water, sanitation, credit and education in rural and urban areas. It is a key factor in recovering from ethnic conflict and coping with political transition. Finally, it can reduce poverty through micro and macro channels by affecting the movement of information useful to the poor, and by improving growth and income redistribution at the national level. The SCI studies rely on three sets of proxies to measure social capital: membership in local associations and networks, indicators of trust and adherence to norms, and collective action. If social capital affects the well being of people and the development of nations, the chapter asks, should donor organizations invest in it? While studies have shown that no country has reached high levels of development without adequate development of its human resource base and without solid investment in human capital, the same empirical case has not yet been made for social capital. The chapter nevertheless suggests a few ways that recent findings on social capital can influence the agenda of donor organizations. These include using current and new assessment tools to understand more thoroughly the nature of existing institutions in client countries and their roles in social and economic development; working with existing social capital, especially peoples associations and organizations, for the design and delivery of projects; and facilitating enabling environments that foster the strengthening of social capital in partner countries.