A spatial, simultaneous model of social capital and poverty

• Published in: Journal of behavioral and experimental economics Vol. 78; pp. 183 - 192
• Main Authors: Harrison, Jane L., Montgomery, Claire A., Jeanty, P. Wilner
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier Inc 01.02.2019; Elsevier Science Ltd
• Subjects: Community well-being; Impact analysis; Poverty; Simultaneous equation models; Social capital; Spatial econometrics; Well being; United States > US; Simultaneous equation models; Community well-being; Poverty; Spatial econometrics; Social capital
• ISSN: 2214-8043; 2214-8051
• DOI: 10.1016/j.socec.2018.09.001

•Higher levels of social capital are associated with reductions in poverty.•The presence of poverty is a deterrent to building social capital.•Endogeneity and spatiality are critical dimensions of community well-being.•Impoverished areas should pair poverty reduction and social capital strategies. This study explores the interrelationship between social capital and poverty, a negative indicator of well-being, in the Western United States. Econometric models that account for the endogeneity of poverty and social capital, spatial dependence, and cross-equation error correlation were used to explore two questions: is the presence of social capital associated with reduced poverty levels and does the presence of poverty impact social capital stocks? We found evidence that communities with higher social capital levels tend to have lower poverty rates and that poverty may pose barriers to social capital formation. This suggests that policies to reduce poverty will be more effective if coupled with policies to support social capital formation. The study's findings are particularly salient for communities in persistent poverty. These results emerged only after accounting for endogeneity and spatial relationships. Because many factors contributing to well-being are jointly determined with well-being and indicators of well-being are frequently spatially clustered, this situation is likely to be more common than has been typically recognized in the literature.