An Economic Analysis Of Social Capital Change In Rural China

Social capital is a hot topic in economics research field at present though there is no consensus on its definition. In this dissertation, social capital is defined as the informal institution that affects people's interaction, including the social networks, trust and norms. Since the rural reform in 1978, especially after the mid-1980's, the rural social capital has been changing all the time. Although there is a great deal of literature on rural social capital, the research on its change is hard to find, and the economic explanation of the change is even more scarce. Two research methods, The desktop research and the field research, are adopted to explain the change of social capital and its influence on the rural economic growth in China. In the framework of classical economics, the change of rural social capital is explained by a deeper division of labor and the monetary exchange of agricultural products. The way to reconstruct the rural social capital is given, and also a new perspective of how to avoid the negative effects of social capital and how to bring its positive role into play is provided.The change of rural social capital in China is described and explained in the first part of this dissertation. With the establishment of market economy, the tendency of a deeper division of labor and the monetary exchange of agricultural products is increasingly obvious. The change in division of labor and exchange of agricultural products makes the peasants'social network wider than a social network consisting of family members, relatives and neighbors. It also turns the particular trust into the general trust and the code of ethics into the code of contract. 226 questionnaires of more than 10 villages in Chenggu County Shaanxi Province were adopted and the conclusion was that the division of labor and the monetary exchange of agricultural products did affect the rural social capital, and they imposed more influence on modern social capital than on the traditional one .An analysis of the impact of rural social capital change on rural economic development is provided in the second part of this dissertation. A Wider social network can bring more trade opportunities; and the general trust and the code of contract can reduce transaction costs. So modern social capital is more economically effective than the traditional one, though the latter is effective in a small range. There are three prominent problems in the rural economic growth in China, scarce human capital, low financial efficiency and slow proliferation of agricultural technology. The traditional social capital can play a limited role in solving these problems, while the modern social capital can work in a broader space. However, the rural social capital is in the transition period, in which the social capital has neither the restraints of ethics nor the consciousness of contracts, which imposes a lot of negative effects on the rural economic and social development.Suggestion on reconstruction of rural social capital is given in the third part of this dissertation. It's the trend of the tide that social capital turning from a traditional one to a modern one, but the negative impact of transitional social capital makes it necessary to shorten the transition period. The Traditional rural social capital has little left, and the modern one is in the germination period. Therefore, to fasten the transition means to reconstruct a new modern social capital. It's impossible and unnecessary to discard the traditional social capital completely, so the reasonable part of traditional social capital should be retained in the new modern social capital. The peasants, NGOs and the government all should take active measures to reconstruct social capital. The peasants should try their best to enhance their human capital and participate in the collective activities actively. NGOs , the main supply source of modern rural social capital, not only should be a good communication bridge between the peasants and the government, but also foster the civil awareness of the peasants. The government should provide a good environment for the peasants and the NGOs to accumulate social capital in an indirect way, otherwise there will be a crowding-out effect.The rural social capital is changing in the background of economic transition, only having a comprehensive understanding of the causes and direction of the transition , as well as the problems in the transition and its impact on rural economic development, can we find a way of reconstructing the rural social capital, so as to make it beneficial to the rural economic and social development.