Does social capital reduce poverty? A case study of rural households in Terengganu, Malaysia

Abstract

In this study, the relationship between social capital and poverty is examined. The data employed are primary data, collected from a sample of 2500 households in rural Terengganu, Malaysia. Information on household demographic characteristics, income, human capital, physical assets (capital) and social capital is collected. Social capital covers six dimensions: i) groups and networks, ii) trust and solidarity, iii) collective action and cooperation, iv) information and communication, v) social cohesion and inclusion, and vi) empowerment and political action.Social capital index for each household, in the scale of 1 to 10, is calculated by applying a linear transformation technique. The analysis in this study is based on logit model estimation. Interestingly, the results show that social capital plays an important role in poverty alleviation, consistent with the evidence in the recent literature. Other factors that are found to be important include human capital, physical capital, the age and gender of the head of the household, as well as the size of the household.