Social Capital, Network Effects, and Savings in Rural Vietnam

TY - JOUR

T1 - Social Capital, Network Effects, and Savings in Rural Vietnam

AU - Newman, Carol

AU - Tarp, Finn

AU - Van Den Brock, Katleen

N1 - JEL Classification: D14;O12;Z13

PY - 2014/3

Y1 - 2014/3

N2 - Information failures are a major barrier to formal financial saving in low-income countries. We explore the extent to which social capital in rural Vietnam plays a role in increasing formal savings where knowledge gaps exist. Social capital is defined as information sharing and the elimination of information asymmetries through active participation in the Women's Union. We consider high- and low-quality networks in terms of the quality of information transmitted. We find that membership of high-quality networks leads to higher levels of saving in formal financial institutions and saving for productive investments. Our results support a role for social capital in facilitating savings and suggest that transmitting financial information through the branches of the Women's Union could be effective in increasing formal savings at grassroots level. We also conclude that it is important to ensure that the information disseminated is accurate given that behavioral effects are also found in networks with low-quality information.

AB - Information failures are a major barrier to formal financial saving in low-income countries. We explore the extent to which social capital in rural Vietnam plays a role in increasing formal savings where knowledge gaps exist. Social capital is defined as information sharing and the elimination of information asymmetries through active participation in the Women's Union. We consider high- and low-quality networks in terms of the quality of information transmitted. We find that membership of high-quality networks leads to higher levels of saving in formal financial institutions and saving for productive investments. Our results support a role for social capital in facilitating savings and suggest that transmitting financial information through the branches of the Women's Union could be effective in increasing formal savings at grassroots level. We also conclude that it is important to ensure that the information disseminated is accurate given that behavioral effects are also found in networks with low-quality information.

KW - Faculty of Social Sciences

KW - household savings

KW - information failure

KW - social capital

KW - Vietnam

KW - Women's Union

U2 - 10.1111/roiw.12061

DO - 10.1111/roiw.12061

M3 - Journal article

SN - 0034-6586

VL - 60

SP - 79

EP - 99

JO - Review of Income and Wealth

JF - Review of Income and Wealth

IS - 1

ER -