The Cumulative State Of Social Capital And Its Impact On The Welfare Of The Family

There is a growing recognition that in economic outcomes, whether at the level of the individual or household or at the level of the state, cannot be explained fully by differences in "traditional" inputs such as labor, land, and physical capital. Growing attention is given to the role of social capital in affecting the well-being of households and the level of development of communities and nations.The recognition that social capital is an input in a household's or nation's production function has major implications for development policy and project design. It suggests that the acquisition of human capital and the establishment of a physical infrastructure needs to be complemented by institutional development in order to reap the full benefits of these investments. At the macro level, social capital includes institutions such as government, the rule of law, political parties, etc. This kind of social capital can make people cooperate easily and promote economic growth. At the micro level, social capital refers to the networks and norms that govern interactions among individuals, households and communities. This kind of social capital plays an important role in solving free rider problems and reducing opportunism. It can sometimes substitute for missing, or expensive, legal structures in facilitating investment and other financial transactions.After analyzing the data from 28 provinces in China, we find that household trust is an important determinant of household social capital accumulation, as well as the frequency of visiting neighbors, friends, and relatives; in addition, household social capital has a statistically significant positive influence on the household welfare, with a different effect on families of different well-being.