The Puzzle of Social Capital: A Critical Review

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ERD Working Paper No. 40

The Puzzle of Social CapitalA Critical Review

M.G. Quibria

May 2003

M.G. Quibria is Advisor, Operations Evaluation Department, Asian Development Bank. This note

is derived from a presentation at the ADB Institute in Tokyo on March 2002 on this topic. The

author would like to thank the participants of the seminar and Ernesto Pernia, Salim Rashid,

Syed Zahir Sadeque, and Juzhong Zhuang for helpful comments; to Cherry Zafaralla for

editorial assistance; and to Marilen Macasaquit, Dionisa Boro, and Gina Buenaventura for

research assistance.


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Asian Development Bank

P.O. Box 789

0980 Manila

Philippines

2003 by Asian Development Bank

May 2003

ISSN 1655-5236

The views expressed in this paper are those of the author(s)

and do not necessarily reflect the views or policies of the

Asian Development Bank.


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FOREWORD

The ERD Working Paper Series is a forum for ongoing and recently completedresearch and policy studies undertaken in the Asian Development Bank or on itsbehalf. The Series is a quick-disseminating, informal publication meant to

stimulate discussion and elicit feedback. Papers published under this Seriescould subsequently be revised for publication as articles in professional journalsor chapters in books.


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CONTENTS

ABSTRACT VII

I. INTRODUCTION 1

II. DEFINITIONS OF SOCIAL CAPITAL: A CONFUSING MEDLEY 2

III. IS SOCIAL CAPITAL REALLY CAPITAL OR A BAD METAPHOR? 6

IV. TAUTOLOGICAL DEFINITION AND EXAGGERATION OF BENEFITS 8

V. THE PROBLEMS WITH THE EMPIRICS OF SOCIAL CAPITAL 10

VI. CONCLUDING REMARKS 12


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ABSTRACT

This paper provides a critical review of the burgeoning literature on

social capital, highlighting a number of serious conceptual and empirical

problems associated with this literature. First, the concept of social capital

remains largely elusive, with many different ideas attached to it. This

elusiveness has serious ramifications for empirical and policy analysis. Second,

while the concept of social capital is used to highlight the positive, productive

aspects of sociability, it fails in important ways to qualify as a form of capital.

Third, there are both theoretical and empirical presumptions to suggest thatsocial capital can to lead to undesirable socioeconomic outcomes. Finally,

a large body of empirical work on social capital remains mired in measurement

and estimation problems.


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Here I learn to do a service to another,

without bearing him any real kindness; because I foresee,that he will return my service, in expectation of another of the same kind,

and in order to maintain the same correspondence of

good offices with me or others. And accordingly, after Ihave served him and he is in possession of the advantagearising from my action, he is induced to perform his part,

as foreseeing the consequences of his refusal.

David Hume

Treatise of Human Nature (1740/1978, 521)

I. INTRODUCTION

Social interactions matter. They create social networks, foster trust and values, sustainnorms and culture, create community, and influence economic and social outcomes. While

these ideas have antecedents in the writings of such diversity of earlier authors as KarlMarx, David Hume, Adam Smith, Antonio Genovesi, Emile Durkeim, and Thortsen Veblen, theyhave taken pride of place in the recent literature on social capital. The concept of social capitalhas been applied to explaining a wide variety of social and economic phenomena, ranging from

the growth tragedy in Africa (Easterly and Levine 1997) to the mortality crisis in Russia (Kennedyet al. 1998); from the successful group lending programs in Peru (Karlan 2003) to the flourish-

ing township village enterprises in Peoples Republic of China (PRC) (Weitzman and Xu 1994).This concept highlights the importance of nonmarket social interactions to fill a lacuna in thetraditional neoclassical economic framework. It has been argued by sociologist Granovetter(1985) that the neoclassical framework posits an undersocialized conception of man thatviews man as atomized, anonymous, and bereft of any social influence through social relations.

In other words, the neoclassical framework ignores the role of nonmarket social interactions indetermining individual and collective behavior and shaping economic and social outcomes. Inthe real world, there are many examples of how individual and collective behavior is shaped bynonmarket social influences in the form of culture, norms, and social structure. An individuals

taste for books, restaurants, and movies is often largely determined by what is consideredhip. Similarly, ones educational aspirations, or decision to smoke or take drugs, or to havechildren out of wedlock are all matters significantly affected by the behavior of ones peer

groups, role models, and norms and values of the surrounding society.

While there has been a proliferation of the literature on social capital in recent years, it isfraught with serious conceptual and empirical measurement and estimation problems. This

paper highlights some of these conceptual and empirical measurement and estimation prob-lems that seem to have arrested the pace of progress of this literature. This paper divides theseissues into four broad categories. First, the concept of social capital remains largely elusive.


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Different authors have attributed different meanings, leading to a wide range of conceptual

ambiguities. Second, in parallel with human and physical capital, this literature uses the meta-phor of social capital to highlight the positive, productive aspects of sociability. However, insome important ways, social capital falls short of being a form of capital. Third, the existing

literature emphasizes largely the positive consequences, eschewing the bad ones. There areboth theoretical and empirical presumptions that nonmarket social interactions can lead toundesirable social and economic outcomes. Fourth, a significant body of empirical works in thisarea remains mired in serious measurement and estimation problems.

The organization of this paper is as follows. Section II deals with the definitional aspectsand the confusions surrounding them. Section III addresses the question: Is social capitalreally a form of capital? Section IV discusses the negative aspects of social capital that have

been largely ignored in the existing literature. Section V points to some measurement andestimation problems that tend to threaten advances in the literature. Given the background ofthis author, the empirical works that receive greater attention in this discussion are those fromeconomists. The final section offers some concluding remarks.

II. DEFINITIONS OF SOCIAL CAPITAL: A CONFUSING MEDLEY

Social capital has been variously defined by different writers. Sociologist Bourdieu, whohas provided an early exposition of the concept, views social capital as the aggregate of actualand potential resources which are linked to the possession of a durable network of more or less

institutionalized relationships of mutual acquaintance or recognitionor in other words, tomembership in a group (Bourdieu 1986, 248). This definition highlights the network aspectof social capital, i.e., the opportunities and advantages that accrue to individuals from group

membership. Bourdieus concept of social capital is essentially individualistic. In his writings,Bourdieu focuses on the instrumental value of social capital in deriving economic and social

benefits from group membership and the impetus for individual investment in such member-ship.

An early reference to the concept of social capital in the economics literature is to befound in the work of economist Glen Loury, who has provided an incisive criticism of the neo-classical theories of racial income disparity. Loury (1977, 176) argues:

The merit notion that, in a free society, each individual will rise to the leveljustified by his or her competence conflicts with the observation that no one

travels that road entirely alone. The social context within which individual matu-ration occurs strongly conditions what otherwise equally competent individu-als can achieve. This implies that absolute equality of opportunity is an idealthat cannot be achieved.

Lourys main contention is that the traditional view on intergenerational income mobility

is highly misleading: it is based on a framework that is excessively individualistic and devoid ofsocial dimensions. A full understanding of the issues of intergenerational income mobility,Loury argues, needs to be based on a framework that incorporates such factors as social net-


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3ERD WORKINGPAPER SERIESNO. 40

works that influence ones access to opportunities. And unequal opportunities in turn can lead

to persistent income disparities across ethnic groups. In other words, the orthodox economictheories that focus merely on creating a competitive market for individual human capital with-out consideration of social networks would be inadequate to address issues of persistent racial

income disparities. In a recent paper, he further notes:Individuals are embedded in complex networks of affiliations: they are mem-bers of nuclear and extended families, they belong to religious and linguisticgroupings, they have ethnic and racial identities and they are attached to par-

ticular localities. Each individual is socially situated, and ones location withinthe network of social affiliations substantially affects ones access to variousresources. Opportunity travels along these social networks (Loury 2000, 233).

Emphasizing social network, Lourys view of social capital closely parallels that of Bourdieu

in its micro perspective as an individual assetthat affects ones economic locus in society.

A similar micro perspective is also evident in the recent work of Glaeser, Laibson, andSacerdote (2002, F439) who define social capital as: a persons social characteristicsinclud-

ing social skills, charisma and the size of the Rolodexwhich enables him to reap market andnon-market returns from interactions with others. They further add, individual social capitalincludes both intrinsic abilities (e.g., being extroverted and charismatic) and the results ofsocial capital investments (e.g., a large Rolodex). The above highlights a number of character-

istics of social capital: (i) social capital is an individual asset; (ii) some aspects of it are intrin-sic to an individual and some can be augmented by individual action; and (iii) social capitalcan be purposefully used to augment ones market and nonmarket position.1

The author who has done the most to popularize the concept, particularly in sociology, isColeman. Colemans characterization of social capital is however astoundingly vague. Accord-

ing to Coleman, social capital constitutes a particular kind of resources available to an actorand he goes on to state:

Social capital is defined by its function. It is not a single entity but a variety ofdifferent entities, with two elements in common: they all consist of some aspect

of social structures, and they facilitate certain actions of actorswhether per-sons or corporate actorswithin the structure (Coleman 1988, S98).

Colemans work has opened up the way for a whole plethora of new definitions that oftenemphasize different and contradictory aspects of social capital. Indeed, Coleman himself hasbeen a leading contributor to this potpourri of confusion. While Colemans examples of social

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DEFINTIONSOFSOCIAL CAPITAL: A CONFUSINGMEDLEY

1 All social relationships need not be instrumental or driven by considerations of maximizing ones market andnonmarket positions. Social relations can be desired for their intrinsic value. In this connection, it may be noted

that long ago, Aristotle argued in his Nichomachean Ethics that utilitarian friendship is a very unreliable type offriendship (van Stavern 2000).


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interactionslike the Jewish diamond merchants in New York in Coleman (1988)in main-

taining trusting relationships are interesting, he includes under the rubric of social capitalmany disparate ideas. As Portes (1998) has correctly noted, Coleman includes under socialcapital both the causes and consequences of social capitalthat is, both the mechanism that

generates social capital (such as the reciprocity of expectations and group enforcement ofnorms) and the benefits that accrue from it (such as access to group resources). Also includedin this expansive definition of social capital are appropriable social organizations2 that pro-vide the context for both sources and effects to materialize. While social capital can help gen-

erate resources for group members, it is important to distinguish between social capital itselfand the outcome of social capital, i.e., the benefits one receives from group membership;between the motivations of donors who provide the gifts and those of recipients who receivethe gifts. Colemans discussion of social capital does not seem to differentiate among the three

elements: the beneficiaries of social capital who are making claims, the sources of social capitaland those who are agreeing to the claims, and the resources themselves.

The above individualistic perspective of social capital differs from the aggregate/commu-

nity perspective that seems to have emerged as the dominant paradigm in the literature, par-ticularly in the hands of political scientist Putnam. Putnam offers an even more expansivedefinition of social capital than Coleman. According to Putnam (1995, 67), social capital

refers to features of social organization such as networks, norms, and social trust that facilitatecoordination and cooperation for mutual benefit. In his recent work, he provides furtherelaboration on the definition:

Social capital is closely related to what some have called civic virtue. Thedifference is that social capital calls attention to the fact that civic virtue ismost powerful when embedded in a network of reciprocal social relations. Asociety of many virtuous but isolated individuals is not necessarily rich in so-

cial capital (Putnam 2000, 19).

According to this aggregate perspective, social capital is a property of the group or thecommunity or even the nation as a whole, although there is less than unanimity among authorswhat this property is. Different authors have highlighted different aspects.

Some recent notable contributors to this aggregative perspective include Inglehart,Fukuyama, Bowles, Gintis, and Hayami. Inglehart (1997, 188) equates social capital with cul-ture: that is, a culture of trust and tolerance, in which extensive network of voluntary associa-

tions form. And to him, culture is a system of attitudes, values, and knowledge, that is widelyshared within a society and is transmitted from generation to generation (Ingelhart 1997,15). His interest is however to link these cultural dimensions to economic and political out-comes at the country levelin particular the level of democracy.

2 Appropriable social organizations, according to Coleman, refer to voluntary associations that are used for purposes

other than their original intent. An example of an appropriable social organization is the residents association inan urban housing project. The association is initially formed for the purpose of pressuring builders to fix various

problems (leaks, crumbling sidewalks, etc.). After the problems have been solved, the organization becomesavailable for appropriation by the residents to improve their quality of life.


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Fukuyama (1995) emphasizes the role of trusts and spontaneous sociability in reduc-

ing transactions costs and increasing economic efficiency.3 These transactions costs are salientin day-to-day economic activities like finding the appropriate buyer or seller, negotiating acontract, complying with government regulations, and enforcing that contract in the event of

dispute or fraud. According to Fukuyama (1999, 16), social capital is:an instantiated set of informal values or norms shared among members of agroup that permit them to cooperate with one another. If members of the groupcome to expect that others will behave reliably and honestly, then they will

come to trust one another. Trust acts like a lubricant that makes any group ororganization run more effectively.

Echoing similar themes, Bowles and Gintis (2002, F419) define social capital as: trust,concern for ones associates, a willingness to live by the norms of ones community and to

punish those who do not. This definition highlights the role of trusts and norms to bind themembers of the group/community to cooperate. According to Bowles and Gintis, their defini-tion follows a social structural approach that contrasts with the individual-based approachof Glaeser and others.

Hayami (2001, 291) highlights a community perspective:

Relationships of mutual trust created through long-term and multiple transac-

tions would not only be effective in suppressing moral hazards between thecontracting parties but would also promote collaborative relationships withinthe wider community. Thus, trust accumulated through personal interactionsin the community increases efficiency and reduces costs associated with the

division of labor. In this regard, trust is a kind of social capital similar tosocial overhead capital such as roads and harbors.

As is obvious from the above, social capital has become shorthand for community. Thetrust and social harmony that glues a community can help overcome the opportunism and

moral hazard in interpersonal relationships. This can help not only to reduce transaction costsin various types of market relationships but also overcome the free-rider problem in the provi-sion of local public goods in a community.

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DEFINTIONSOFSOCIAL CAPITAL: A CONFUSINGMEDLEY

3 Without using the term social capital, economists have long recognized the role of trusts in coping with market

failures and establishing economic efficiency, well before Fukuyama. A clear explicit statement is to be found inArrow (1971, 22) who notes: In the absence of trust, opportunities for mutually beneficial cooperation would have

to be foregone. norms of social behavior, including ethical and moral codes (are) reactions of society tocompensate for market failures. Even much earlier, as Bruni and Sugden (2000) note, such 18th century econo-

mists as David Hume, Adam Smith, and Antonio Genovesi recognized the importance of trust in economic transac-tions. Indeed they devoted considerable attention to such issues as: how trust can be rational, the conditions

under which such rational trust is possible, and the economic and social institutions that reproduce these condi-tions.


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The above sampling of definitions suggests that social capital has been used to indicate

many different notions.4 Some view social capital as an individual asset that comes from accessto networks and social connections, whereas others hold that it is a collective asset in the formof a homogenous community with common interests and shared values. Some authors have

focused on trusts and tolerance, while others have focused on the degree of civic and socialengagements. Still others have highlighted issues of culture and social norms. The theory ofrepeated games5 have been used to interpret norms of behavior, culture, and informal institu-tions: how they emerge and how they are sustained over time.6

Given that the concept of social capital is a heterogeneous one, embodying a set of re-lated but distinct notions, it throws up a serious measurement and aggregation problem. Thisis most explicitly stated by Dasgupta (2000, 327) who notes: It encourages us to amalgamate

incommensurable objects, namely (in that order) beliefs, behavioral rules, and such forms ofcapital assets as interpersonal links, without offering a hint as to how they are to be amalgam-ated. This led Dasgupta to suggestquite sensibly that these different notions of socialcapital need to be studied separately to understand how they are interrelated.

III. IS SOCIAL CAPITAL REALLY CAPITAL OR A BAD METAPHOR?

Proponents of the concept of social capital have devoted considerable attention to ex-plaining why it can indeed be considered as capital. Its current conceptualization draws on theearly work of Pierre Bourdieu, which differentiates between different forms of capital that

included economic capital, cultural capital, linguistic capital, scholastic capital, and social capi-tal. Later on, in his work entitled The Forms of Capital, Bourdieu (1986) narrows these differ-ent types of capital into threeeconomic, cultural,7 and socialand addresses the question of

how these forms of capital interrelate and can be converted from one form to the other in orderto maximize accumulation. From this perspective, he defines social capital as the aggregate of

4 In the words of Dasgupta (2000, 325), social capital (has been) a peg on which to hang all those informal

engagements we like, care for and approve of. Not only that, the concept is being continuously stressed. This hasled Fischer (2001, 3) to comment that the concept is expand(ing) in all directions like a swamp in a bad weather.

5 Repeated-game models highlight how long-run self-interest can help overcome short-term temptations of oppor-tunism. A well-known result in game theory, known as the folk theorem, informs us that enlightened self-interest

of sufficiently forward looking players is adequate to ensure a full gamut of cooperative possibilities (Gibbons

1992). The basic intuition behind the theorem is that if an individual is to be punished in the future for noncoop-erative behavior today, this threat is sufficient to sustain cooperation over time. This result has been further

generalized by Kandori (1992) who shows that when each member of the group punishes noncooperative behavioreven when she is not directly affected, it leads not only to greater cooperation but also to the emergence of a set

of strictures, something akin to a social norm. This paper also shows how the idea of social sanctions can be

formalized.6 The repeated-game approach suggests that ones understanding of the others long-term self- interests may help

one to trust the other and not succumb to certain short-term temptations. However, there is more to trust thanthis calculative conception (Williamson 1993). To the extent that this calculative trust is important, the theory of

repeated games can provide useful insights.7 Cultural capital refers to ones cultural features and social backgrounds (such as language, accent, manners, social

conduct etc.) that influence ones advance in life. Obviously, the concepts of social and cultural capital are closely

interrelated.


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the actual or potential resources which are linked to possession of a durable network of more

or less institutionalized relationships of mutual acquaintance and recognition which pro-vides each of its members with the backing of collectively-owned capital (Bourdieu 1986,248). This view of social capital as resourcesaccumulated primarily as a set of obligations

from others according to the norm of reciprocitywhich agents can draw on to achieve theirinterests is however not new.8 A macro-aggregative perspective of social capital, as may berecalled, is to be found in the recent works of authors such as Putnam who view it as anattribute of social organization. Putnam (2000) also makes a further taxonomic distinction

between two types of social capitalbonding and bridging. Bonding social capital fostersdenser social networks while bridging social capital creates larger networks. Notwithstandingthis taxonomic refinement and the heuristic appeal for the idea of social capital as a form ofcapital, the argument is yet to win many converts in social sciences, particularly among econo-

mists.

At first blush, social capital may seem like a natural complement to the concepts of physi-cal and human capital. However, this extension is far from neat and throws up serious concep-

tual incongruities. To Solow (2000, 6), it is an attempt to gain conviction from a bad analogy.And Arrow (2000) calls for an outright abandonment of the capital metaphor and the termsocial capital. To him, capital has three important characteristics: (i) capital has a time dimen-

sion; (ii) it requires deliberate sacrifice of the present for future benefit; and (iii) it is alien-ablethat is, its ownership can be transferred from one person to another. According toArrow, social capital may have a time dimension similar to physical capitalfor example, repu-tation or trust takes time to develop and hence it satisfies (i). However, social capital does not

necessarily entail any material sacrifices,9 and hence does not generally satisfy (ii). And finally,in most cases, it is difficultas with human capitalto change the ownership of social capi-tal,10 and hence does not satisfy (iii). All this would suggest that conceptually, social capitalfalls short of being a form of capital.

And of course, this conceptual criticism applies as much to social capital in general as toPutnams taxonomic innovation regarding bridging and bonding social capital. In this connec-tion, Fischer (2001, 3) rightly notes that Putnams use of such metaphors, as bridging and

binding social capital is somewhat infelicitous as both terms are more suited to a metaphoraround ties than around capital.

Solow (2000) raises some measurement problems. While physical and human capital canbe measured and their rate of returns calculated, such rigorous measurements are much more

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ISSOCIAL CAPITALREALLYCAPITAL ORA BAD METAPHOR?

8 As Portes (1998) notes, similar perspectives can be found in sociology in the classical analysis of social exchange

by Simmel, which has resurfaced more recently in the works of authors of the rational action school such asColeman and Schiff.

9 While there may be some aspects of social capital that are costly to acquire, most others do not entail any materialsacrifice. The examples of the latter include: people are born into religious and ethnic groups and into nobility; or,

as noted by Glaeser et al. (2000), some people are born with inherent social skills and charisma.1 0 The problem of alienability in social capital has been expressed most starkly by Fischer (2001, 3) who observes: It

(social capital) is a metaphor that misleads: Where can I borrow some social capital? What is the going interest

rate? Can I move some of my social capital off-shore?


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problematic in the case of social capital.11 Solow cites the example of the East Asian miracle

economies and the total factor productivity estimates of Kim and Lau, and Collin and Bosworth,and notes that these estimates seem to suggest that either there is no special social capitalstory underlying the Asian success, just conventional production economics, or that social

capital is precisely what accounts for the ability of these societies to accumulate capital and tomobilize skilled labor effectively. He concludes that either way, there is something to look forthat is at least capable of being found (Solow 2000, 9). In light of these conceptual andmeasurement problems, many economists are reluctant to label social capital as capital. 12

In other words, although there is a general consensus that social interactions have impor-tant influences on economic outcomes, there is not much of a consensus whether these influ-ences can beor should bemeaningfully codified into such a metaphor as social capital. The

situation has been nicely summarized by Bowles and Gintis (2002, p. F420):13

Perhaps social capital, like Voltaires God, would have to have been invented ifit did not exist. It may even be a good idea. A good term it is not. Capital refers

to a thing that can be ownedeven a social isolate like Robinson Crusoe had

an axe and fishing net. By contrast, the attributes said to make up social capitaldescribe relationships among people. As with other trendy expressions, socialcapital has attracted so many disparate uses that we think it better to drop the

term in favor of something more precise.

IV. TAUTOLOGICAL DEFINITION AND EXAGGERATION OF BENEFITS

The way much of the existing literature defines social capital tends to exaggerate its

beneficial aspects. As Portes (1998) and Durlauf (1999) have noted, many have defined socialcapital in such terms that confuse its sources with consequences or its existence with functions.That is, the evidence of the existence of social capital is often inferred from its positive out-

comes. As noted earlier, according to Coleman (1988) social capital is to be defined by itsfunctions and Putnam (1995) viewed social capital in terms of features of social life that

1 1 As Dasgupta (2000) has noted, there is a serious measurement problem with social capital, even if it is assumedthat it is a type of capital. To aggregate the different components of social capital as networks and norms into a

stock of capital, one would require a set of market prices associated with different types of social capital. However,

these are the commodities where market failures are most conspicuous.1 2 Even many ardent advocates of the concept of social capital concede that social capital is not really a capital in the

strict sense of the term. For example, Ostrom (2000), who argues that social capital is a fundamental concept thatoffers an essential complement to natural, physical, and human capital, notes that social capital is different from

other forms of capital in some important ways. She identifies four key differences: First, social capital does not

wear out with useon the contrary, it erodes from a lack of use. Second, it is not easy to see or measure. Third,it is hard to construct through external (for example donor) intervention. Finally, national and regional government

institutions strongly affect the level and type of social capital available to individuals to pursue long-term develop-ment efforts. Indeed, these key differences constitute the very basis for the Arrow-Solow critique.

1 3 Bowles and Gintis advocate abandoning the term social capital in favor of community that better captures the

aspects of good governance that explain social capitals popularity, as it focuses attention on what groups do ratherthan what people own (Bowles and Gintis 2002, F.420) It is noteworthy that a recent volume by Aoki and Hayami

(2001) on the subject was named, Communities and Markets in Economic Development.


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facilitate cooperation and coordination for mutual benefit. This line of argumentation leads

to circuitous reasoningand exaggeration of the benefits of social capital. Social capital hasits benefits and costs: it is not an unmixed blessing. It can lead to such adverse effects asexclusion of outsiders, excessive claims by insiders, restrictions of individual freedoms, and

perpetuation of backward norms. The following further elaborates these points.First, social capital that opens up opportunities for the members of the network, which is

often based on ethnicity, religion, language, and profession, can at the same time constitute anenormous barrier to entry for others outside the network. There are many real world examples

of this type of exclusion based on race and ethnicity. As cited by Portes (1998), Waldinger(1996), in his study of immigrant labor in New York City, notes that poor blacks do not haveentry to jobs in construction and service industries for lack of access to the ethnic networks

that control the recruitment process. Similarly, the adverse effects of the networks of mer-chants have been underscored by Smith (1776/1976, 232), who notes:

People of the same trade seldom meet together, even for merriment and diver-

sion, but the conversation ends in a conspiracy against the public, or in some

contrivance to raise prices. It is impossible indeed to prevent such meetings,by any law which either could be executed, or would be consistent with libertyand justice. But though the law cannot hinder people of the same trade from

sometimes assembling together, it ought to do nothing to facilitate such as-semblies; much less to render them necessary.

While the conspiracies referred to by Smith14 can help the group members to safeguardtheir economic interests or perpetuate monopoly privileges, they certainly do not help soci-

ety.15

Second, while a close-knit group can be a source of economic dynamism for its member-

ship, it can also dilute personal incentives to work hard. Social capital can lead to moral hazardand the creation of welfare-haven. It can help sustain the indolence and economic impoverish-ment of those who failed by the resources and hard work of those who succeeded. Social capitalcan be a safety net that can penalize success and reward failures. A concrete illustration isprovided by Geertz (1963) who notes that successful entrepreneurs in Bali were constantly

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TAUTOLOGICALDEFINITIONANDEXAGGERATIONOFBENEFITS

1 4 A similar skeptical view about the network of interest groups is to be found in Olson (1982) who argues that thecollusion of interest groups is harmful to economic development as it leads to unproductive rent-seeking activities.

1 5 Sobel (2002) provides another interesting illustration of such a conspiracy in terms of the prisoners dilemma.

When the prisoners cooperate with each other and do not confess they receive a brief sentence. This conspiracy ofthe culprits certainly makes the prisoners better off (relative to the equilibrium outcome), but this is unlikely to

make the rest of the society better off as it would presumably want see the criminals put behind bars.


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taxed by job-hunting and money-seeking kinsmen. Social capital, in conjunction with the re-

distributive social norm of many traditional societies, may represent a serious obstacle toaccumulation and successful entrepreneurship.16

Third, while group membership of a community has its advantages, it often enforces strict

conformity, infringes on individual freedoms, and creates pressures for submission to medioc-rity. Many independent-minded individuals consider these aspects of a community life suffo-catingand have attempted to escape them for the freedom of urban life. As Hayami (1998)has noted, enlightenment philosophers such as Montesqieu considered traditional customs

and norms as oppressing human minds. These traditional customs and norms, needless toemphasize, can have a similar dampening effect on the dynamics of economic development. Inhis theory of entrepreneurship, Schumpeter (1934 and 1950) discussed about industrial mu-

tation, a process of industrial development facilitated by entrepreneurship in an evolvingmarket economy. This industrial mutation entails transition from personal capitalism, ensnaredby traditional behavior, to one of rational capitalism that breaks the crust of convention andthrives on the impersonal forces of the market.

Finally, network and group coordination can often lead to the establishment of a badequilibrium of norms and values. When a bad equilibrium is established, role model and peergroup influences tend to sustain it. Such a bad equilibrium is individually rational: it is optimal

for individuals to subscribe to such group norms because any deviation leads to social oppro-brium and group retribution and hence lower individual welfare. However, the group as a wholeis worse off because it is engaged in socially suboptimal behavior (behavior that is either

destructive or risky). Teenage pregnancy and drug addiction are examples of such behavior,which is often established through role model and peer group influences and sustained throughgroup conformity. When a network or group leads to such a bad equilibrium system of normsand values, then the members of the network or group and the society as a whole would be

better off if such a network or group did not exist.

1 6 A different kind of mechanism may be at play in developed countries where social networks can create a culture

of poverty. When the disadvantaged interact only with the disadvantaged, this can foster social stagnation. As theevidence from developed countries suggests, social networks among the poor are often better at supplying infor-

mation on welfare eligibility than job availability, creating more negative peer pressures than positive role modelsand sustaining a culture of welfare dependency than an environment of entrepreneurship and economic dynamism.

A recent paper by Bertrand, Luttmer, and Mullainathan (2000) provides strong empirical support from the US in

favor of this hypothesis. Their careful empirical work confirms the existence of a high degree of correlationbetween social networks (based on a common linguistic identity) in a neighborhood and the extent of welfare

dependency among language groups that rely highly on welfare.


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V. THE PROBLEMS WITH THE EMPIRICS OF SOCIAL CAPITAL

Recent years have seen the emergence of a sizeable empirical literature on social capital.A high profile work that has brought social capital to doorsteps of the wider policy community,

particularly in developed countries, is Putnams (2000) much celebrated book, Bowling Alone:The Collapse and Revival of American Community.17 In this book, Putnam attributes a wholevariety of social ills in the United States (US) todayfrom declining voting participation toincreasing crime rates to shrinking philanthropyto lack of social capital. While the book puts

forward an interesting hypothesis18 and culls together an impressive body of evidence, itsempirical analysis remains rudimentary19 and its discussion of policy somewhat cavalier. Not-withstanding these deficiencies, the important contribution of this work has been to stimulatefurther research on social capital and its role in redressing social and economic problems.

Social capital has also been gaining popularity as a concept for analyzing the socioeco-nomic problems of developing countries. The emerging literature follows three major strands.The first strand deals with the link between economic growth and social capital. Some of the

notable studies in this regard include Knack and Keefer (1997), Zak and Knack (2001), Collierand Gunning (1999), Easterly and Levin (1997), and Rodrik (1998). The first two papers con-firm, in the context of cross-country growth regressions, the relationship between economic

performances and trust in people. The last three studies argue that ethnically heterogeneoussocieties (implying lower level of social capita) are slow to growth or to adjust less efficientlyto external shocks.20

The second strand deals with the issue how social capital can substitute for missing capi-tal and insurance markets. The contributions in this area include van Bastelaer (2000); Goldstein,DeJanvry, and Sadoulet (2001); Fafchamps and Lund (2003); and Morduch and Sicular (2001).The first study highlights the role of existing social capital ties in improving the poors access

to social capital. In lending schemes involving groups, social ties among borrowers can helpreduce transaction costs associated with screening, monitoring, and enforcement. The study by

SECTIONV

THEPROBLEMSWITHTHEEMPIRICSOFSOCIAL CAPITAL

1 7 This book is a grandiose elaboration of his thesis contained in the earlier shorter article, Putnam (1995).1 8 A number of authorsfor example, Paxton (1999) and Ladd (1996)have contested the claim that there has been

a decline in social capital in the US.1 9 Much of the analysis is conducted in terms of bivariate graphical representation, which, as is well known, cannot

distinguish between correlation and causality. The study also reports some multivariate regression results thatseem to be marred by problems of omitted variables and unobserved heterogeneity.

2 0 An interesting qualitative study that explores the relationship between trust and macroeconomic performance is

Fukayama (1995). In this study, Fukayama classifies countries into low trust and high trust countries. According tohis assessment, Germany, Japan, and US are high trust countries whereas PRC; France; Hong Kong, China; Italy;

Republic of Korea; and Taipei,China are low trust countries. He argues that high trust countries have greater

economic success as they can implement more efficient organizational innovations. When trust is limited tofamilies, the supply of capital and qualified managers remains constrained, and this in turn restricts the scale of

private family firms. While the basic hypothesis of Fukayama seems plausible, his classification of countries basedon trust is highly impressionistic as is his much-vaunted empirical relationship between trusts and economic

performance. As the recent record of economic performance of nations indicates, some of his low trust countrieshave made remarkable organizational innovations and registered stellar economic performance (for example, the

PRC) whereas some of his high trust countries seem to be mired in near perpetual economic stagnation (forexample, Japan).


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M. G. QUIBRIA

12 MAY2003

Goldstein, DeJanvry, and Sadoulet highlights the role of social capital as a social safety net

mechanism in Ghana and identifies the factors that help shape the social connection that un-derpins the insurance mechanism. The Fafchamps-Lund study relates to the Philippines andanalyzes the role of networks of friends and relatives in providing mutual friends. The final

study, Morduch and Sincular (2001), analyzes the effectiveness of social capital as a risk-sharing mechanism in rural PRC in the post-reform period.

The third strand deals with the issue how social capital can help circumvent the collectiveaction problem and help the provision of local public goods. These studies include Ostrom

(2000); Ostrom, Gardner, and Walker (1994); Bardhan (2001); Kikuchi, Fujita, and Hayami(2001); and Otsuka and Tachibana (2001). In their study of the irrigations system in develop-ing countries, Ostrom and her collaborators analyze how social capital has been helpful in

eliciting cooperation among farmers, evolving a common norm of behavior, and circumventingcollective actions problems. The studies by Bardhan (2001) on the irrigation communities inSouth India; by Kikuchi, Fujita, and Hayami on the irrigation system in the Philippines; and byOtsuka and Tachibana (2001) on the community forestry in Nepal all offer interesting illustra-

tions on the role of social capital in the management of community resources.

As a cursory review of the empirical literature on social capital would suggest, the litera-ture is diverse in terms of methodology and the degree of analytical sophistication. Some of it

is descriptiveand does little beyond suggesting the importance of social capital (in whateversense the term is defined in the particular context). Some of it is more quantitative, ofteninvolving regression-type analysis. However, a large segment of this quantitative literature

suffers from various technical, econometric problems.

In a recent paper, Durlauf (2002) examines the common estimation problems that per-vade the social capital literature. While he agrees that these problems are, at some level, en-

demic to a wide body of the empirical studies, they seem to be particularly serious for theempirical social capital literature. In the words of Durlauf (2002, F474):

The empirical social capital literature seems to be particularly plagued by vaguedefinition of concepts, poorly measured data, absence of appropriate exchange-ability conditions, and lack of information necessary to make identificationclaims plausible. These problems are particularly important for social capitalcontexts as social capital augments depend on underlying psychological and

sociological relations that are difficult to quantify, let alone measure.

In the context of three benchmark empirical studies,21 Durlauf notes three sets of genericproblems. First, social capital studies often fail to distinguish between social capital effects and

2 1 These three studies have been chosen because they are well regarded in the social science literature and analyzethe social capital issues in different contexts: one at the individual level in the US, another at the individual level

in a developing country, and still another at the national level, involving cross-country regression analysis. Furstenberg

and Hughes (1995) explore, with data from Baltimore (US), how the probability of an individual dropping out ofschool is related to social capital factors such as the presence of a father in the household and the educational

aspirations of the persons friends. Narayan and Pritchett (1999) examine the role of social capital in the form of


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other effects that follow from group membership. However, this problem of identification is

not resolved by incorporating a full range of alternative group influences; it requires a cleardefinition of social capital and conceptualization of the underlying causal process. Second,social capital proxies are often endogenous and this requires the use of instrumental variables

based on ad hoc exogeneity assumption. However, constructing credible instrumental variablesin these types of regression requires a theory of the determinants of social capital. Third, socialcapital regression exercises rely on untenable comparability assumptions.22 That is, the analy-sis assumes that the regression uses comparable objects as observations.23 In light of these

problems, Durlauf suggests that empirical analyses on social capital need to step back fromgrandiose approaches and limit themselves to more specific sociological dimensions of indi-vidual behavior and rely on the use of more experimental data.

VI. CONCLUDING REMARKS

As the foregoing discussion suggests, social capital has come to signify different thingsfor different authors. Given the wide diversity of notions associated with the term social capi-tal, the concept has remained largely amorphous and is yet to reach the clarity and precision

required of a tool to be used for rigorous empirical work.

Notwithstanding this limitation, recent years have seen a mushrooming of a literaturethat applies many different notions of social capital to analyze many diverse economic and

social issues. Despite its exaggerated claims, as Portes and Landolt (1996) rightly note, muchof this literature does not go beyond calling attention to the possible individual and familybenefits of sociability or a nuanced understanding of the pros and cons of groups and com-munities. The policy conclusions are often very banal.24 Durlauf (2002, F459) is even more

critical in his assessment of the empirics of social capital when he asserts that whether these

SECTIONVI

CONCLUDINGREMARKS

membership of groups in influencing household outcomes in rural Tanzania. Finally, Knack and Keefer (1997)

examine in the context of a cross-country regression framework the impact of social capitalsuch as civic coopera-tion and truston economic growth.

2 2 As quoted by Durlauf (2002), Draper et al. (1993, 1) describes the importance of exchangeability in empiricalexercises in the following manner: Statistical methods are concerned with combining information from different

observational units and with making inferences from the resulting summaries to perspective measurements on the

same or other units. These operations will be useful only when the units to be combined are judged to be similar(comparable or homogenous).

2 3 As is now widely known, results of cross-country growth regressions are often extremely fragile. These types ofexercises have been subject to considerable criticism by both economic theorists and econometricians. Growth

theorists find the empirical equations ad hoc without any sound analytical basis, while econometricians complain

about the various technical econometric problemssuch as unobserved fixed effects, measurement errors,

endogeneity, parameter heterogeneity etc.that sully the effort. See Quibria (2002) for further details on this.2 4 In a recent paper, Costa and Kahn (2003) surveys the proliferating economic literature on how the determinants of

civic engagement in a community. This survey covers about 15 studies encompassing different nations, different

social capital measures, and different time periods. The policy message that emerges from this survey, as theauthors report, is, heterogeneity reduces civic engagement. This message, which should surprise nobody, pro-

vides very little guidance for policies. As much of the heterogeneity takes the form of ethnic and racial diversity

and hence is not amenable to policy manipulationexcept by odious political means!this type of message iscold comfort to real world policymakers!


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A CRITICAL REVIEW

M. G. QUIBRIA

14 MAY2003

(social capital) studies establish the empirical importance of social capital in understanding

the various socio-economic outcomes, my conclusion is no. These assessments are obviouslynot very salutary nor do they provide a clean bill of health regarding the state of empiricalanalysis in this area.

To move the literature forward, it would be useful first to get the concept right. It shouldbegin with the acknowledgement that there is no single entity called social capital, but manydistinct notionssuch as trusts, norms, culture, community, and networkshighlight the manydifferent aspects of nonmarket social interactions. It is heartening to note that recent works in

this area, particularly in economics, seem to reflect this heterogeneity of perspectives, focus-ing on different aspects of social interactions and drawing distinctly different analytical andpolicy implications. However, to avoid confusion and to achieve greater analytical traction and

empirical understanding, social capital studies need to proceed with a clear definition of thespecific notion of social capital being applied.25

As noted earlier, despite the recent proliferation of studies in social capital, this has not

been accompanied by a commensurate increase in analytical rigor. Analytical rigor does not

necessarily mean heavy reliance on quantitative methods. Indeed, there are certain questionsthat are better addressed in broad qualitative terms, while others require greater reliance onthe quantitative approach. However, the success of the quantitative studies depends on the

availability of the relevant and reliable data.

Measuring social capital, which is often vested in such entities as trust, community, peerpressure, role models, and networks, is difficult. The task becomes doubly difficult if this mea-

surement needs to incorporate both quality and quantity. However, further progress with theempirical analysis of social capital is inextricably connected with the availability of better-quality data. However, this is not easily obtained. Data on social capital have been sourced in a

number of different ways. First, surveys of perceptions can be a major source. However, theyare often an imperfect source, as the respondents to surveys have no incentive to answer

honestly or carefully.26

Second, the standard practice in empirical social sciences includingeconomics is to infer the nature of economic and social interactions from observations of

outcome data. However, such outcome data have limited ability to discriminate among alterna-tive hypotheses regarding the underlying processes. Finally, economic experiments can be animportant source of data on social capital. As social capital concepts relate to social interac-

tions involving subjective processes, it is therefore only natural that social capital studies rely

2 5 This definition is important to guide empirical analysisin particular, its choice of the socialcapital indicator.

Different social-capital indicatorseven if we assume they are interconnected and reflect the different attributes

of the underlying social-capital processdo not move in sympathy. Fischer (2001) examines seven indicators ofsocial capital trusting most people, church attendance, belonging to organizations, socializing with neighbors,

socializing with friends outside the neighborhood, and giving money to charityfrom the General Social Surveys(1972-1999) and finds little coherence among them. The different indicators often display little correlation, and

they even sometimes exhibit opposite trends.2 6 The emerging experimental literature confirms this divergence. In a recent paper, Bertrand and Mullainathan

(2001) provide a more in-depth discussion with illustrative examples why such subjective survey data can be

misleading.


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considerably on experimental and subjective data.27 However, this is something that until re-

cently, with perhaps the exception of social psychologists, aroused very little enthusiasm amongeconomists and other social scientists.

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No. 6 Achieving the Twin Objectives of Efficiency andEquity: Contracting Health Services in Cambodia

Indu Bhushan, Sheryl Keller, and BradSchwartz,March 2002

No. 7 Causes of the 1997 Asian Financial Crisis: What

Can an Early Warning System Model Tell Us?

Juzhong Zhuang and Malcolm Dowling,June 2002

No. 8 The Role of Preferential Trading Arrangementsin Asia

Christopher Edmonds and Jean-Pierre Verbiest,July 2002

No. 9 The Doha Round: A Development Perspective

Jean-Pierre Verbiest, Jeffrey Liang, and LeaSumulong

July 2002No. 10 Is Economic Openness Good for Regional

Development and Poverty Reduction? The

PhilippinesE. M. Pernia and P. F. Quising

October 2002No. 11 Implications of a US Dollar Depreciation for Asian

Developing CountriesEmma Fan

July 2002No. 12 Dangers of Deflation

D. Brooks and P. F. QuisingDecember 2002

No. 13 Infrastructure and Poverty ReductionWhat is the Connection?

I. Ali and E. PerniaJanuary 2003

No. 14 Infrastructure and Poverty Reduction

Making Markets Work for the Poor

Xianbin YaoMay 2003

No. 15 SARS: Economic Impacts and Implications

Emma Xiaoqin FanMay 2003

No. 16 Emerging Tax Issues: Implications of Globalizationand Technology

Kanokpan Lao ArayaMay 2003

No. 17 Pro-Poor Growth: What is It and Why is ItImportant?

Ernesto M. PerniaMay 2003

SERIALS

(Co-published with Oxford University Press; Available commercially through Oxford University PressOffices, Associated Companies, and Agents)

1. Asian Development Outlook (ADO; annual)

$36.00 (paperback)

2. Key Indicators of Developing Asian and Pacific Countries (KI; annual)

$35.00 (paperback)

JOURNAL

(Published in-house; Available commercially through ADB Office of External Relations)

1. Asian Development Review (ADR; semiannual)

$5.00 per issue; $8.00 per year (2 issues)


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MONOGRAPH SERIES

(Published in-house; Available through ADB Office of External Relations; Free of charge)

EDRC REPORT SERIES (ER)

No. 1 ASEAN and the Asian Development BankSeiji Naya, April 1982

No. 2 Development Issues for the Developing East

and Southeast Asian Countriesand International CooperationSeiji Naya and Graham Abbott, April 1982

No. 3 Aid, Savings, and Growth in the Asian RegionJ. Malcolm Dowling and Ulrich Hiemenz,

April 1982No. 4 Development-oriented Foreign Investment

and the Role of ADBKiyoshi Kojima, April 1982

No. 5 The Multilateral Development Banksand the International Economys MissingPublic SectorJohn Lewis, June 1982

No. 6 Notes on External Debt of DMCsEvelyn Go, July 1982

No. 7 Grant Element in Bank Loans

Dal Hyun Kim, July 1982No. 8 Shadow Exchange Rates and Standard

Conversion Factors in Project Evaluation

Peter Warr, September 1982No. 9 Small and Medium-Scale Manufacturing

Establishments in ASEAN Countries:

Perspectives and Policy IssuesMathias Bruch and Ulrich Hiemenz,

January 1983No. 10 A Note on the Third Ministerial Meeting of GATT

Jungsoo Lee, January 1983No. 11 Macroeconomic Forecasts for the Republic

of China, Hong Kong, and Republic of KoreaJ.M. Dowling, January 1983

No. 12 ASEAN: Economic Situation and Prospects

Seiji Naya, March 1983No. 13 The Future Prospects for the Developing

Countries of Asia

Seiji Naya, March 1983No. 14 Energy and Structural Change in the Asia-

Pacific Region, Summary of the Thirteenth

Pacific Trade and Development ConferenceSeiji Naya, March 1983

No. 15 A Survey of Empirical Studies on Demand

for Electricity with Special Emphasis on PriceElasticity of DemandWisarn Pupphavesa, June 1983

No. 16 Determinants of Paddy Production in Indonesia:1972-1981A Simultaneous Equation ModelApproachT.K. Jayaraman, June 1983

No. 17 The Philippine Economy: EconomicForecasts for 1983 and 1984J.M. Dowling, E. Go, and C.N. Castillo,

June 1983No. 18 Economic Forecast for Indonesia

J.M. Dowling, H.Y. Kim, Y.K. Wang,and C.N. Castillo, June 1983

No. 19 Relative External Debt Situation of AsianDeveloping Countries: An Application

of Ranking MethodJungsoo Lee, June 1983

No. 20 New Evidence on Yields, Fertilizer Application,

and Prices in Asian Rice ProductionWilliam James and Teresita Ramirez, July 1983

No. 21 Inflationary Effects of Exchange Rate

Changes in Nine Asian LDCsPradumna B. Rana and J. Malcolm Dowling,

Jr., December 1983

No. 22 Effects of External Shocks on the Balanceof Payments, Policy Responses, and DebtProblems of Asian Developing Countries

Seiji Naya, December 1983No. 23 Changing Trade Patterns and Policy Issues:

The Prospects for East and Southeast Asian

Developing CountriesSeiji Naya and Ulrich Hiemenz, February 1984

No. 24 Small-Scale Industries in Asian Economic

Development: Problems and ProspectsSeiji Naya, February 1984

No. 25 A Study on the External Debt Indicators

Applying Logit AnalysisJungsoo Lee and Clarita Barretto,

February 1984No. 26 Alternatives to Institutional Credit Programs

in the Agricultural Sector of Low-IncomeCountriesJennifer Sour, March 1984

No. 27 Economic Scene in Asia and Its Special FeaturesKedar N. Kohli, November 1984

No. 28 The Effect of Terms of Trade Changes on the

Balance of Payments and Real NationalIncome of Asian Developing CountriesJungsoo Lee and Lutgarda Labios, January 1985

No. 29 Cause and Effect in the World Sugar Market:Some Empirical Findings 1951-1982Yoshihiro Iwasaki, February 1985

No. 30 Sources of Balance of Payments Problemin the 1970s: The Asian ExperiencePradumna Rana, February 1985

No. 31 Indias Manufactured Exports: An Analysisof Supply SectorsIfzal Ali, February 1985

No. 32 Meeting Basic Human Needs in AsianDeveloping CountriesJungsoo Lee and Emma Banaria, March 1985

No. 33 The Impact of Foreign Capital Inflowon Investment and Economic Growthin Developing Asia

Evelyn Go, May 1985No. 34 The Climate for Energy Development

in the Pacific and Asian Region:

Priorities and PerspectivesV.V. Desai, April 1986

No. 35 Impact of Appreciation of the Yen on

Developing Member Countries of the BankJungsoo Lee, Pradumna Rana, and Ifzal Ali,

May 1986No. 36 Smuggling and Domestic Economic Policies

in Developing CountriesA.H.M.N. Chowdhury, October 1986

No. 37 Public Investment Criteria: Economic Internal

Rate of Return and Equalizing Discount RateIfzal Ali, November 1986

No. 38 Review of the Theory of Neoclassical Political

Economy: An Application to Trade PoliciesM.G. Quibria, December 1986

No. 39 Factors Influencing the Choice of Location:

Local and Foreign Firms in the PhilippinesE.M. Pernia and A.N. Herrin, February 1987

No. 40 A Demographic Perspective on Developing

Asia and Its Relevance to the BankE.M. Pernia, May 1987

No. 41 Emerging Issues in Asia and Social Cost

Benefit AnalysisI. Ali, September 1988


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No. 42 Shifting Revealed Comparative Advantage:

Experiences of Asian and Pacific DevelopingCountriesP.B. Rana, November 1988

No. 43 Agricultural Price Policy in Asia:Issues and Areas of ReformsI. Ali, November 1988

No. 44 Service Trade and Asian Developing EconomiesM.G. Quibria, October 1989

No. 45 A Review of the Economic Analysis of Power

Projects in Asia and Identification of Areas

of ImprovementI. Ali, November 1989No. 46 Growth Perspective and Challenges for Asia:

Areas for Policy Review and ResearchI. Ali, November 1989

No. 47 An Approach to Estimating the PovertyAlleviation Impact of an Agricultural ProjectI. Ali, January 1990

No. 48 Economic Growth Performance of Indonesia,the Philippines, and Thailand:The Human Resource Dimension

E.M. Pernia, January 1990No. 49 Foreign Exchange and Fiscal Impact of a Project:

A Methodological Framework for Estimation

I. Ali, February 1990No. 50 Public Investment Criteria: Financial

and Economic Internal Rates of Return

I. Ali, April 1990No. 51 Evaluation of Water Supply Projects:An Economic Framework

Arlene M. Tadle, June 1990No. 52 Interrelationship Between Shadow Prices, Project

Investment, and Policy Reforms:An Analytical Framework

I. Ali, November 1990No. 53 Issues in Assessing the Impact of Project

and Sector Adjustment Lending

I. Ali, December 1990No. 54 Some Aspects of Urbanization

and the Environment in Southeast Asia

Ernesto M. Pernia, January 1991No. 55 Financial Sector and Economic

Development: A Survey

Jungsoo Lee, September 1991No. 56 A Framework for Justifying Bank-Assisted

Education Projects in Asia: A Reviewof the Socioeconomic Analysis

and Identification of Areas of ImprovementEtienne Van De Walle, February 1992

No. 57 Medium-term Growth-Stabilization

Relationship in Asian Developing Countriesand Some Policy ConsiderationsYun-Hwan Kim, February 1993

No. 58 Urbanization, Population Distribution,

and Economic Development in AsiaErnesto M. Pernia, February 1993No. 59 The Need for Fiscal Consolidation in Nepal:

The Results of a SimulationFilippo di Mauro and Ronald Antonio Butiong,

July 1993No. 60 A Computable General Equilibrium Model

of Nepal

Timothy Buehrer and Filippo di Mauro,October 1993

No. 61 The Role of Government in Export Expansion

in the Republic of Korea: A RevisitYun-Hwan Kim, February 1994

No. 62 Rural Reforms, Structural Change,

and Agricultural Growth inthe Peoples Republic of ChinaBo Lin, August 1994

No. 63 Incentives and Regulation for Pollution Abatementwith an Application to Waste Water TreatmentSudipto Mundle, U. Shankar,and Shekhar Mehta, October 1995

No. 64 Saving Transitions in Southeast AsiaFrank Harrigan, February 1996

No. 65 Total Factor Productivity Growth in East Asia:

A Critical Survey

Jesus Felipe, September 1997No. 66 Foreign Direct Investment in Pakistan:

Policy Issues and Operational Implications

Ashfaque H. Khan and Yun-Hwan Kim,July 1999

No. 67 Fiscal Policy, Income Distribution and Growth

Sailesh K. Jha, November 1999


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No. 1 International Reserves:Factors Determining Needs and Adequacy

Evelyn Go, May 1981No. 2 Domestic Savings in Selected Developing

Asian Countries

Basil Moore, assisted byA.H.M. Nuruddin Chowdhury, September 1981

No. 3 Changes in Consumption, Imports and Exports

of Oil Since 1973: A Preliminary Survey ofthe Developing Member Countriesof the Asian Development Bank

Dal Hyun Kim and Graham Abbott,September 1981

No. 4 By-Passed Areas, Regional Inequalities,

and Development Policies in SelectedSoutheast Asian CountriesWilliam James, October 1981

No. 5 Asian Agriculture and Economic DevelopmentWilliam James, March 1982

No. 6 Inflation in Developing Member Countries:An Analysis of Recent Trends

A.H.M. Nuruddin ChowdhuryandJ. Malcolm Dowling,March 1982

No. 7 Industrial Growth and Employment in

Developing Asian Countries: Issues and

Perspectives for the Coming DecadeUlrich Hiemenz, March 1982

No. 8 Petrodollar Recycling 1973-1980.Part 1: Regional Adjustments andthe World Economy

Burnham Campbell, April 1982No. 9 Developing Asia: The Importance

of Domestic Policies

Economics Office Staff under the directionof Seiji Naya, May 1982

No. 10 Financial Development and Household

Savings: Issues in Domestic ResourceMobilization in Asian Developing CountriesWan-Soon Kim, July 1982

No. 11 Industrial Development: Role of SpecializedFinancial InstitutionsKedar N. Kohli, August 1982

No. 12 Petrodollar Recycling 1973-1980.Part II: Debt Problems and an Evaluationof Suggested Remedies

Burnham Campbell, September 1982No. 13 Credit Rationing, Rural Savings, and Financial

Policy in Developing Countries

William James, September 1982No. 14 Small and Medium-Scale Manufacturing

Establishments in ASEAN Countries:

Perspectives and Policy IssuesMathias Bruch and Ulrich Hiemenz, March 1983

No. 15 Income Distribution and EconomicGrowth in Developing Asian Countries

J. Malcolm Dowling and David Soo, March 1983No. 16 Long-Run Debt-Servicing Capacity of

Asian Developing Countries: An Application

of Critical Interest Rate Approach

Jungsoo Lee, June 1983No. 17 External Shocks, Energy Policy,

and Macroeconomic Performance of AsianDeveloping Countries: A Policy AnalysisWilliam James, July 1983

No. 18 The Impact of the Current Exchange RateSystem on Trade and Inflation of SelectedDeveloping Member Countries

Pradumna Rana, September 1983No. 19 Asian Agriculture in Transition: Key Policy Issues

William James, September 1983No. 20 The Transition to an Industrial Economy

ECONOMIC STAFF PAPERS (ES)

in Monsoon AsiaHarry T. Oshima, October 1983

No. 21 The Significance of Off-Farm Employmentand Incomes in Post-War East Asian GrowthHarry T. Oshima, January 1984

No. 22 Income Distribution and Poverty in SelectedAsian CountriesJohn Malcolm Dowling, Jr., November 1984

No. 23 ASEAN Economies and ASEAN EconomicCooperationNarongchai Akrasanee, November 1984

No. 24 Economic Analysis of Power ProjectsNitin Desai, January 1985

No. 25 Exports and Economic Growth in the Asian Region

Pradumna Rana, February 1985No. 26 Patterns of External Financing of DMCs

E. Go, May 1985No. 27 Industrial Technology Development

the Republic of KoreaS.Y. Lo, July 1985

No. 28 Risk Analysis and Project Selection:

A Review of Practical IssuesJ.K. Johnson, August 1985

No. 29 Rice in Indonesia: Price Policy and Comparative

Advantage

I. Ali, January 1986No. 30 Effects of Foreign Capital Inflows

on Developing Countries of AsiaJungsoo Lee, Pradumna B. Rana,

and Yoshihiro Iwasaki, April 1986No. 31 Economic Analysis of the Environmental

Impacts of Development ProjectsJohn A. Dixon et al

Documents

The Puzzle of Social Capital: A Critical Review