Formation of Social Capital for Common Pool Resource Management

Abstract

A standard optimal investment model is used to analyze farmers' decision to accumulate social capital in terms of participating in collective activities for irrigation management. Several predictions borne out by the data are presented in this study. Social capital investment in small irrigation groups (1) decreases when the farmer's field is located at the downstream area where water is scarce; (2) increases when farmers have larger ricefields; (3) decreases when farmers pay the irrigation service dues; and (4) increases when the farmer belongs to a heterogeneous group which facilitates collective action when pooling resources to reduce the risks involved in rice farming. Moreover, the farmers' social capital investment in other small irrigation groups in the irrigation system 1) increases when farmers have larger rice-growing areas; 2) increases when there is a high level of trust among the farmers; but 3) declines as the opportunity cost of time increases due to coordination and participation in collective activities with farmers from other areas of the system.