Social Capital Formation in Mexico: Evidence from the 1996 Household Survey

Transcription

1 Social Capital Formation in Mexico: Evidence from the 1996 Household Survey Yoshiaki Hisamatsu Department of Advanced Social and International Studies, University of Tokyo 3-8-1, Komaba, Meguro-ku, Tokyo, Japan Abstract: This letter investigates the incidence of social capital formation using the 1996 Mexican Household Survey of Income and Expenditures. Social capital is defined as accumulation of investments for forming and maintaining social relationship. Such investments are conducted through various expenditures aimed for social group formation and maintenance, such as expenditures for social centers, funerals, parties, local public and communal services, transfers to non-family members, and donations. We employ Tobit method to examine its demand function. The richer and the more rural households are, the more likely they are to spend for social capital. Interestingly, social capital formation is substitute of educational expenses. This type of empirical analysis is necessary before social capital is explicitly taken into account of social policy formulation. Postal Address: Department of Advanced Social and International Studies, University of Tokyo, 3-8-1, Komaba, Meguro-ku, Tokyo, Japan Fax Number: 81 (Japan)

2 I. Introduction The contribution of social capital (or social networks and the norms of reciprocity and trust that arise from them) to economic development has been amply demonstrated in the literature (Colemen, 1988; Putnam, 1993). The empirical research on formation of social capital is a neglected topic in development economics, where the bulk of research focuses on the effect of already-accumulated social capital on economic development (Knack and Keefer, 1997; Narayan and Pritchett, 1999; Barr, 2000). This letter investigates the incidence of social capital formation using 1996 Mexican Household Survey of Income and Expenditure (Encuesta Nacional de Ingresos y Gasto de los Hogares 1996). Obtaining an overall picture of social capital formation is important, especially because this information is indispensable in social policy formulation which explicitly intends to take into account of social capital. Though it is not always recognized, certain targeting is usually involved into policy interventions for social sectors (Van de Walle, 1995). Thus, if social capital is considered explicitly as a part of social policies in the future policy discussion, we should obtain the incidence of social capital formation so that we can identify practically important policy tools. The rest of letter is organized as follows. In section 2, the concept of social 2

3 capital is briefly examined. Recent research on social capital allows us to conduct individual-household-based empirical research. In the section 3, we argue that certain spending for social relationship is used for construction of social capital. We also briefly summarize general features of the 1996 household survey in Mexico. Section 4 shows several empirical findings from the analysis of the survey. Section 5 concludes with a few policy implications. 2. Recent Literature on Social Capital Literature on social capital is extensive and thus our survey in this section is selective. Various authors have either broad or narrow meanings for the concept and differ in their focus. A common understanding, however, is that there is an effect of social capital on economy. In his seminal paper, Coleman (1988) argues that social relationship surrounding a child enhances his probability of attaining education, which generates human capital in a whole community. Putnam (1993) claim that civil community (through promoting association, mutual trust, and cooperation) facilitates collective action such as good governance, and results in economic prosperity (Putnam, 1993). There could be a downside of collective action. Strong community ties and 3

4 network might provide business enterprise with disincentive of investments, and very strong social ties such as the one found in Mafia and criminal organization might significantly reduce overall welfare (Portes and Landolt, 2000). However, researchers in the area of development generally emphasize benefits of social capital in developing societies, since it compensates the lack of physical and human capital and thus could be utilized for further development of societies. Moreover, recent research on social capital allows us to explore individualhousehold-based empirical research. Two points are worth mentioning. The first is transition from history-centered approach such as Putnam (1993), to actor-centered approach. Not totally satisfied with Putnam s treatment with social capital, a few researchers have taken an actor-centered approach which focuses on those who accumulate social capital (Fox, 1996; Durston, 1999). The second is viability of individual-based construction of social capital resulting from distinction between trust and trustworthiness. Glaeser and others study what social capital is by questioning a sample of Harvard undergraduates (Glaeser, Laibson, Scheinkman, and Soutter, 1999). They argue that those who claim they have trust actually only do trustworthy behaviors. Their result indicates that the question of how much you are trusting really answers how much you should be trusted. 4

5 The brief literature review above suggests an important link in the mechanism in formation of social capital, which have been missing in the literature. People trust others who are trustworthy. This somewhat tautological statement actually gives ones an opportunity to create social capital, or good social relationships with others, on an individual basis. Actors can make decisions whether they invest to be trustworthy or not. Being trustworthy adds return to the trusted, because being so make others attempt to do collective action with the trusted. Doing something for social relationship, and especially becoming or being trustworthy could give return to the investors, because it brings trust and consequently collective action attempt from others later. In this letter we define spending for social relationship, and especially for managing to become (or maintain to be) trustworthy, as a representative variable of social capital formation. We will quantify such expenditures of Mexican households using household survey. 3. How to Quantify Social Capital Formation Using Household Survey What items are precisely spent for social capital formation, as such defined in 5

6 the last section? Almost all consumption could be made as a trustworthinessenhancing measure or not. It could purely depend on circumstances. Despite of this apparent indeterminacy, there are certain spending items, which are relatively evident in trustworthiness enhancement in function. Certain expenditures aimed for social group are classified in this category. In order to capture this function, we can select following items from the data set: 1) quotas to social centers, associations, and clubs, 2) payment for funerals and cemetery, 3) payments for fiestas such as space, music and food, 4) payment for cargo system, communal service, 5) payments for infrastructure of local public services, 6) help and transfers to non-family members, and 7) philanthropic and religious contributions and donations. Even though we did not pick up voluntary participation, and we ignored nonmonetary nature of social relationship, these expenditures are highly likely to be spent to create and maintain social norms. The 1996 Mexican Household Survey 6

7 In the case of Mexico, every two years official statistics agency (Instituto Nacional de Estadística, Geografía e Informática: INEGI) takes such a survey and publishes the result 1. We employ the 1996 household survey which is composed of nationally representative households in Mexico. After eliminating 20 households which did not consume anything, data of 14,022 households is employed for statistical analysis. All of the households are classified in five residential areas according to population size 2 and in total expense decile Empirical Results Three findings emerged from simple tabulations of data. First, according to Table 1, among those households who spend for social capital, the share of social capital formation in total spending is substantial through all deciles, and becomes higher in respect with total expense. Second, the richer the households become, the more likely they invest in social capital (Table 2). This is a very robust finding. Third, there are differences in ingredients of social capital formation. The 7

8 richer the households, the more likely they are to spend for social center, fiesta, and transfers to non-family members (Table 3). The more poor the household, the more likely they are to spend for cargo and contributions. However, there is no clear relationship between expenditure for local public service and total expense. Econometric Analysis of Social Capital Formation So far, we have examined this issue without separating many possible explanatory variables. In this subsection, we show the result of statistical analysis. We use Tobit estimation, since there is limit of zero expense. The formula tested here is, IS = I(X, Z, E, Y), where IS: Social Capital Formation, X: Household Attributes (Household Head Education, Number of Residents in a household, and Household Head Age), Z: Relationship Variables (Rural Residence and Telephone Holding), E: Education Expenses 4, and Y: Total Expense. The result is shown in Table 4. Total expense (representative variable of income), rural residence, education of household head, and age of household head are positively associated with expense for 8

9 social capital formation. In contrast, telephone holding, number of residents in a household, and expenses for formal education are negatively associated with expense for social capital formation. This negative association between social capital formation and human capital formation could suggest a possibility of substitution between educational investment and social capital formation. This is not necessarily contradictory against Coleman s original claim of social capital in the creation of human capital because he focuses on the role of (ex-ante) accumulated social capital in the formation of human capital investment. However, our finding suggests there could be crowding out effect between social capital formation and human capital formation. 5. Conclusion In this letter, we examine the incidence of expenditures for social capital formation using the 1996 Mexican household survey. Arguing that certain consumption items are used explicitly for building social relationship, I examine how those items were consumed. The richer and the more rural households are, the more likely they are to spend for social capital. Some items like fiesta and transfers to non- 9

10 family members are rather consumed by rich households. Our statistical finding is that social capital formation is a substitute of human capital formation. The last finding suggests two policy implications. First, our finding indicates that the urban poor is likely to invest less in social capital, at least in monetary form. Thus, we would expect that they might be more vulnerable than the rural poor in social capital sense. Then, consideration of poverty alleviation toward the urban poor could be different from the one toward the rural poor. Second, usually appreciated Keep Social Capital Intact! slogan could be qualified since our study suggests human capital formation and social capital formation could be substitutes. Policy makers have to consider this possibility especially in respect with the socialcapital-abundant rural poor. Acknowledgement: The author thanks Yasuyuki Sawada for comments and suggestions. The usual caveat applies. 10

11 References: Barr, Abigail, 2000, Social Capital and Technical Information Flows in the Ghanaian Manufacturing Sector, Oxford Economic Papers, 52, pp Coleman, James, 1988, Social Capital in the Creation of Human Capital, American Journal of Sociology. Vol.94, pp Durston, John, 1999, Construyendo capital social comunitario, Revista de la CEPAL, 69. Fox, Jonathan, 1996, How Does Civil Society Thicken? The Political Construction of Social Capital in Rural Mexico, World Development, Vol.24, No.6, pp Glaeser, Edward L., David Laibson, Jose A. Scheinkman, and Christine L. Soutter, 1999, What is Social Capital? The Determinants of Trust and Trustworthiness, NBER Working Paper No Instituto Nacional de Economía, Geografía, e Informática (INEGI), 1998, Encuesta Nacional de Ingresos y Gastos de los Hogares 1996, Aguascalientes. Knack, Stephen and Phillip Keefer, 1997, Does Social Capital Have an Economic Payoff? Quarterly Journal of Economics, 112, pp Narayan, Deepa and Lant Pritchett, 1999, Cents and Sociability: Household Income and Social Capital in Rural Tanzania, Economic Development and Cultural Change, 47 (4), pp Portes, Alejandro and Patricia Landolt, 2000, Social Capital: Promise and Pitfalls of its Role in Development Journal of Latin American Studies, 32, pp Putnam, Robert D., 1993, Making Democracy Work, Princeton University Press, 11

12 Princeton. Van de Walle, Dominique, 1995, Incidence and Targeting in Dominique van de Walle and Kimberly Nead eds., Public Spending and the Poor, Johns Hopkins University Press, Baltimore and London. 12

13 Tables: Table 1. Social Capital Formation in Total Spending Expense Decile Share of Social Capital Formation in Total Spending Rich 1 18 % 2 22 % 3 19 % 4 17 % 5 13 % 6 13 % 7 14 % 8 14 % 9 13 % Poor % Source: Author s Calculation Table 2. Share of Households which Spent for any Social Capital Formation Expense Decile Share of Households which Spent for any Social Capital Formation Rich 1 58 % 2 44 % 3 35 % 4 29 % 5 27 % 6 25 % 7 19 % 8 17 % 9 15 % Poor % Source: Author s Calculation 13

14 Table 3. Social Capital Formation by Decile and by Sub-category Expense Decile Social Center Funeral Fiesta Cargo Local Public Service Transfer to Non- Family Contribution Rich 1 7% 5% 12% 4% 4% 41% 27% 2 3% 5% 11% 7% 6% 41% 28% 3 2% 4% 10% 10% 7% 35% 33% 4 1% 3% 10% 11% 7% 31% 38% 5 1% 3% 9% 16% 9% 24% 38% 6 1% 3% 7% 16% 13% 21% 39% 7 1% 4% 5% 20% 8% 19% 42% 8 1% 3% 6% 17% 11% 19% 43% 9 1% 3% 2% 29% 9% 11% 45% Poor 10 0% 1% 1% 31% 9% 7% 51% Source: Author s Calculation Table 4. Determinants of Social Capital Formation Estimate Standard Error t-statistic P-value Coefficient [.000] Total Expense E [.000] Rural (Area5: 1, Other: 0) [.000] Household Head Education [.000] (Secondary: 1, Below: 0) Telephone Holding [.028] (Yes: 1, No: 0) Number of Residents [.014] Household Head Age [.034] Formal Education Expense [.050] Expense for Books and Magazines [.002] Number of Observation:

15 Footnotes: 1 The most recent survey is of 1998, but the result has not been published in a complete form. Based on this survey, income distribution in Mexico is officially reported. 2 1: Metropolitan Area; 2: Locality of 100,000 or more residents; 3: Locality of 15,000 up to 99,999 residents; 4: Locality of 2,500 up to 14,999 residents; 5: Locality of less than 2,500 residents 3 Total expense is representative variable of total income. 4 We tested exogeneity between education expense and expenses for social capital formation using Smith and Blundell test (Smith and Blundell, 1986). The null hypothesis of weak exogeneity cannot be rejected. 15