The Effect of Social Capital on Fertilizer Adoption: Evidence from Rural Tanzania

Do the characterisitics of local social structures affect fertilizer adoption among rural households? This paper extends the model of technology adoption of Feder and Slade (1984) to incorporate social capital, and then tests the model with household data from two agro-ecological zones in rural Tanzania. Probit estimates of the model show that the probability of adoption of improved fertilizer in 1994-95 in the Central Plateau region in increasing in land under cultivation, cumulative adoption patterns, ethnically-based social affiliations, the adoption of improved seeds, the availability of credit and extension services, and the average years of residence in the village. In the Plains region, this probability is increasing in land under cultivation, ethnically based social affiliations and consultative norms. Overall, these results, which are robust after testing for the likely reverse causality of land under cultivation, support the finding that ethnically based and participatory social affiliations act as forms of social capital in the adoption decision.social capital, technology adoption, Tanzania

Social Capital and Consumption among Agricultural Households

This paper develops a life cycle model for agricultural households in which social capital is a fixed input into household production. The intertemporal solutions of the model yield four results that are consistent with recent empirical and qualitative literature on social capital and consumption among agricultural households: commodity consumption will rise for an agricultural household in a village where public social capital is increasing - even if the household itself has invested little in their own accumulation of social relations; increased inequality within villages is associated with lower social capital; public social capital will decrease significantly in the presence of migration of young from rural communities; and current consumption levels will be less sensitive to increases in income uncertainty when social capital is increasing. The paper uses information on agricultural households in Tanzania to illustrate the model.

Institutional Determinants of the Impact Community-Based Water Services: Evidence from Sri Lanka and India

Using data from community-based water services in Sri Lanka and India, this paper shows first that: (a) improved household health and reduced water collection times are associated with better service design and construction: (b) well-designed services involve more community members in the design process and final decision-making about service type; and (c) well-constructed services have effective mechanisms to monitor household contributions to construction. The paper then shows that these service-level institutions are endogenously determined: in communities with higher levels of social capital—in particular, with more active community groups and associations—design participation is more likely to be high and monitoring mechanisms are more likely to be in place. This suggests a way to place an economic value on this form of social capital in the context of water projects: as the net present value of the marginal increase in health associated with active critic associations. These results suggest that designers and supervisors of community-based water projects need to pay special attention to the prevailing levels of social capital as one of the factors that will influence performance. When targeting a range of communities, the allocation of investment resources for water services programs may need to be adjusted to take into account the lack of this form of social capital in some villages: possible adjustments include increased investments in social mobilization efforts (for example, through the strengthening of local organizations) and in more direct supervision to oversee system performance.

The forgotten rationale for policy reform : the productivity of investment projects

Using economic rates of return from more than 1,200 public and private sector projects implemented in 61 developing countries, the authors analyze determinants of investment productivity. Results from Tobit estimation demonstrate that the degree of countrywide policy distortions - macroeconomic, exchange rate, trade and pricing - critically affects the productivity of investments. Countries with undistorted policies are likely to be unproductive investments. In countries with distorted policies, investments are likely to be unproductive. And within a country, investments become more productive when economic policymaking improves. The productivity of projects in the tradable sectors are also affected (in a nonlinear fashion) by the size of a country's public investment program. The authors discuss possible selection biases in this data set, present tests of robustness, and highlight policy implications. In particular, donor financing for improvements in the policy climate is likely to pay off. A powerful rationale for supporting structual reform is that it raises the productivity of both public and private investments.Payment Systems&Infrastructure,ICT Policy and Strategies,Environmental Economics&Policies,Decentralization,Economic Theory&Research,ICT Policy and Strategies,Environmental Economics&Policies,Economic Theory&Research,Economic Stabilization,Achieving Shared Growth

Does participation improve project performance : establishing causality with subjective data

Development practitioners are coming to a consensus that participation by the intended beneficiaries improves project performance. But is there convincing evidence that this is true? Skeptics have three objections: 1)"Participation is not objective -- project rankings are subjective; 2) this subjectivity leads to"halo effects"; 3) better project performance may have increased beneficiary participation rather than the other way around -- a statistical association is not proof of cause and effect. The authors show methodologically how to answer each of these objections. Subjectivity does not preclude reliable cardinal measurement. Halo effects do not appear to induce a strong upward bias in estimating the effect of participation. Finally, instrumental variables estimation can help establish a structural cause and effect relationship between participation and project performance -- at least in the rural water supply projects they studied.Governance Indicators,ICT Policy and Strategies,Health Economics&Finance,Statistical&Mathematical Sciences,Poverty Monitoring&Analysis

The Effects of Volunteering for Non-profit Organizations on Social Capital Formation: Evidence from a Statewide Survey

We use the household production framework to theoretically connect sociability and purposive incentives for volunteering and two forms of social capital: social connections and civic capacity. Then, using a unique statewide data set, we estimate the determinants of (a) the probability of receiving social capital benefits and (b) the level of such benefits. We show that: religious and social service organizations have a large impact on social capital formation; the probability of being socially and civically engaged increases with volunteering; and two-adult families are more likely to feel socially and civically engaged. These results are consistent with recent aggregate evidence on the decline of social capital in the United States: social capital formation declines with less religious and altruistic orientation at the community level, and as families move away from a two-adult family structure. By contrast, through volunteering, one can increase the likelihood of being socially and civically engaged.household production, civic engagement, social capital

Overcoming Information Asymmetries in Low-Income Lending: Lessons from the 'Working Wheels' Program

Without access to reliable transportation, the welfare-to-work transition for low-income households is nearly impossible, yet very little is known about the effectiveness of targeted loan programs designed to improve their access to credit. Since 1998, Vermont's TANF funds have been used to provide automobile loans to low-income residents through the "Working Wheels" program of the Vermont development Credit Union. In this paper, we take advantage of unique micro-level data on Working Wheels loan applications and loan performance to explore how such programs can cost-effectively provide car loans to those who are unable to obtain affordable loans elsewhere. Our results verify the importance of relationship lending, particularly among those without documented credit histories. In the presence of pronounced information asymmetries about credit history, our results justify a loan officer's increased trust in a client with whom the bank has had a stronger relationship; such clients, ceteris paribus, are less likely to default. We conclude that in the current climate of welfare reform, policymakers should consider programs that encourage welfare recipients to establish and maintain relationships with financial institutions in order to facilitate access to affordable credit and to minimize the risk of loan default.low-income lending, relationship lending, information asymmetries, automobile loans, credit-rationing, social capital

Should we Bet on Private or Public Water Utilities in Cambodia? Evidence on Incentives and Performace from Seven Provincial Towns

Is public or private sector provision of water more likely to succeed in urban areas of Cambodia? Using quantitative and qualitative data from a range of surveys and technical assessments, this paper compares consumer satisfaction and technical performance of four private and four public utilities in Cambodia. The results indicate that households served by private utilities are significantly more satisfied with the piped water than customers of public utilities: the daily availability and quality of piped water is better and service interruptions are less frequent. This has not happened by accident. Private utilities hire more educated staff whom they pay higher salaries; maintain their facilities on a more regular basis; and implement quality control programs more diligently. Private sector operators seem to face stronger incentives than public utilities to keep their customers satisfied. However, this improved service does not come for free and, consequently, does not yet reach all the available households. Households served by private utilities pay significantly more for piped water services, and some lower-income households that are not served by private utilities are partially limited by the high connection fees (as opposed to the regular monthly payments). Overall, while this recent effort to introduce private sector involvement in the water sector in Cambodia is encouraging, the full gains have not yet been realized. The commercial incentive for improved performace will likely be stronger if the privatization option used is a lease or concession arrangement; if there is more competition in the water market; and if the regulatory structure in Cambodia encourages commercial incentives to be more demand-responsive and cost conscious. Under these conditions, the private sector is a good bet.supply, privatization, urban infrastructure, Cambodia

Water Demand and the Welfare Effects of Connection: Empirical Evidence from Cambodia

Using cross-sectional household-level data from seven provincial Cambodian towns, we estimate a water demand equation for households connected to the network, and provide an empirical measurement of the economic value of tap water connection. The use of a two-step econometric procedure allows us to analyse issues relating to household access to water and to the volume of household water consumption. We estimate that the connection elasticity with respect to the one-off initial cost of connection is -0.39; the price elasticity of water demand for the connected households lies in a range between -0.4 and -0.5; and the welfare effects of water connection are approximately 17 percent of the actual expenditure of the poor unconnected households. Furthermore, providing a network connection to all households in the sample would have the distributional consequences of decreasing the estimated Gini coefficient by three percentage points and the poverty head-count ratio by six percentage points.

Overcoming Information Asymmetries in Low-Income Lending: Lessons from the "Working Wheels" Program

This study analyzes the role of relationship lending in the automobile credit market among a population generally perceived to be high risk - and thereby 'unlendable'. Using a unique dataset from the Vermont Development Credit Union's "Working Wheels" low-income car loan program, we find that the strength of the relationship between creditor and higher risk borrowers significantly raises the probability of loan approval, and that such borrowers who receive loans are relatively creditworthy. Specifically, for applicants without credit scores, we find that -- in addition to income and debt ratio -- age and the nature of the established relationship with the lender significantly affect the probability of loan approval. By contrast, for applicants with credit scores, only income, debt ratio and the credit score are the significant determinants. In addition, despite the greater information asymmetry associated with applicants whose credit histories are unknown, we find no significant difference in delinquency rates between those with and without credit scores. In the current climate of welfare reform, we conclude that policymakers should consider programs that encourage welfare recipients to establish relationships with traditional financial institutions and establish more programs like "Working Wheels" that facilitate access to affordable credit for automobiles.low-income lending, relationship lending, information asymmetries, automobile loans, credit-rationing