The accumulation of social capital: Implications for the dynamics of inequality and the management of shocks (Ethiopia)

This dissertation explores how social networks affect economic wellbeing, with a focus on the impact of social capital on in asset accumulation and asset distribution. The first essay of this dissertation examines the idea that how wealth is distributed across social groups fundamentally affects the evolution of economic inequality. It underwrites a measure of socio-economic polarisation that permits exploring the hypothesis that economic inequality is most pernicious and persistent when it is socially embedded. Taking an axiomatic approach, the second essay defines and describes a measure of polarisation in two dimensions. This higher-order measure of polarisation contributes to the model of social capital developed in the first essay, in that it can account for social and an economic dimensions of a population distribution and can capture the interplay between individuals' material welfare and their social characteristics. Finally, the third essay uses survey panel data of rural households to study livestock asset dynamics in the north-east of Ethiopia. This essay tests the hypothesis of wealth divergence and the existence of asset poverty traps. Examining the role of social capital in recovery and growth of households' endowments, both local social relationships as well as 'bridging' social capital seem to have a positive effect on asset holdings directly, as well as indirectly by mitigating the impact of income shocks on livestock capital.