This article outlines an investigation of the determinants of participation in groups. It also explores the effect of income inequality or heterogeneity on individual incentives to join groups that provide some shared economic benefits. A model is used to analyze household level data from two surveys conducted by the World Bank in rural Tanzania. The model is used to examine the extent to which group participation is higher or lower in more unequal communities. The authors also evaluate whether it is the poor or wealthy that drop out of groups when inequality increases.
The findings help to increase understandings of the consequences of inequality. They also contribute to knowledge about the determinants of social capital - in particular the stock of social norms, trust and civic networks that characterize a society. The results reveal that an increase in inequality has an ambiguous effect on participation and that the type of access rule - open or restricted - is more important in determining what income categories are represented in the group. The shape of income distribution can be central to determining whether increased inequality at the village level has a negative impact on the likelihood that the respondents are members of a group. Disaggregating groups by type of access rule reveals that inequality decreases participation in open access groups when there are wide disparities at the bottom of the distribution, while it increases participation in restricted access groups when the disparities are around the middle and top part of the distribution. The authors also assess the impact of inequality on group characteristics, and note that the results suggest that an increase in inequality leads people to sort into more economically homogeneous groups.
Bibliography: Journal of Public Economics, Vol 85, No. 2
pp.235-273
