Abstract:
This paper analyses the impact of social capital on crop income shock. The purpose is to consider ex ante shock reducing role of social capital components of social trust, social cohesion and group membership. Data were collected from randomly selected 309 paddy farming households in Kilombero valley. The Probit model with social capital interaction terms is employed in econometric estimation. Results show that, the effect of social trust and group membership interaction term is positively associated with decreased likelihood of being affected by crop income shock. Hence, for a rural community in which trust is embedded in networks and associations, the desired effect of social trust will only happen it is moderated by group membership. On contrary, there is no evidence indicating social cohesion to be moderated by membership in proving insurance against income shock. However, group membership by itself also plays a significant ex ante shock reducing role. Despite being a component of social capital, social cohesion and group membership interaction term is less statistically intuitive in explaining the social capital role of preventing income shortfall. Therefore, measures that will build more trustworthy within and between groups at village level are of critical importance.
