Crisis, social ties, and household welfare : testing social capital theory with evidence from Indonesia

This paper seeks to build on earlier work by testing how theoretical claims about social capital play out in a particular empirical case. Specifically, The author draws on Pierre Bourdieu's conception of social capital to analyze how household social ties affected welfare and access to resources between 1996 and 2000, during which the economic, social, and political changes resulting from the recent Asian financial crisis swept Indonesia. Using a natural experiment based on panel data collected before and after the Asian financial crisis struck Indonesia, the report shows that social ties can both help households improve their welfare and access resources to deal with shocks. Importantly, however, the effects of different types of social ties vary with context; links that help improve welfare are not necessarily useful in accessing assistance, while ties that facilitate access to government resources actually reduce the chances of getting community help. The distribution of social ties by socio-economic class is then assessed to gauge which groups actually benefit from such links. The data indicate that certain types of social ties are indeed a sort of capital for the poor, who are able to use their relationships as a way of improving well-being. Following an introduction to social capital theory, the framework used and the hypotheses to be tested are outlined. A brief background on the Indonesian context is then provided before introducing the data, variables, and regression models used. After analyzing the results and discussing their implications for the proposed hypotheses, the author closes with his thoughts on applying these results in the development context.