Do Connections Matter? Individual Social Capital and Credit Constraints in Vietnam

We analyze the effects of network-based social capital on easing the credit constraints of rural households, using zero-inflated negative binomial regression analysis. In the context of development economics, the data collection approach used, which originates from the field of sociology, is innovative, insofar as a personal network survey was carried out to measure the individual social capital of rural households. We define four social capital variables according to tie strength and social distance between the respondent and his/her network members, resulting in four different social capital variables: (i) bonding (strong ties to persons of similar social standing); (ii) bridging (weak ties to persons of similar social standing); (iii) bonding-link (strong ties to persons of higher social standing); and (iv) bridging-link (weak ties to persons of higher social standing). Econometric analysis suggests that strong ties to persons of higher social standing can reduce the magnitude of credit constraints.