The research has been undertaken on social capital with reference to developing countries context like Pakistan, and focuses on how the existence of social capital can lead to welfare of the households and their development. A social capital index is developed which is based on household level data collected across socioeconomic clusters, in and around the cities of Karachi, Lahore and Quetta. The relationship between the Social Capital Index and household welfare are analyzed in detail. The major results indicate that social capital together as in an additive sense represented by the social capital index has impact on welfare of the households. Heterogeneity of social capital as measured by the Heterogeneity Index (showing differences in income, ethnicity, kin and religion) shows that the households do not benefit much from being members of associations or organizations which are homogeneous in terms of their own characteristics. The study also highlights the urban rural differences. The results also indicate that social capital does not impact through human capital as represented by education but significantly impacts household welfare separately. The results of the study point to some useful policy implications. They throw light on how households can improve their welfare through associations and interactions with others.

The results of the research may be useful in highlighting how the government can better target programs for development of social capital in the country.

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