Determinants of Social Capital and Its Role on the Social and Economic Outcomes: Household Level Study, the Case of South Wollo Zone, Ethiopia

Abstract

Social capital encompasses the connections, relationships, and norms that support cooperation and collaboration within a community. Scholars emphasize that social capital is essential for encouraging civic participation, promoting community development, and improving overall well-being. This study examines the determinants of social capital and its role in influencing the socio-economic outcomes of rural households in Ethiopia. It identifies unique dimensions of social capital, such as social networks, trust, reciprocity, and informal group participation, and evaluates their impact on the social and economic indicators among rural households. A mixed-methods approach was employed, integrating descriptive and inferential analyses. Data were collected through structured questionnaires from 204 rural households across three woredas in South Wollo, Ethiopia. Descriptive statistics were used to explore socio-economic roles, while logistic regression assessed determinants of participation in social capital dimensions. The study reveals that social capital significantly influences the social and economic outcomes of rural Ethiopia. The findings underscore the importance of social capital in reducing transaction costs, promoting resource sharing, facilitating community development, and addressing rural poverty. Notably, factors such as family size, gender, and homeownership positively influence households’ participation in social capital, while employment status and ethno-religious diversity have a negative impact. The study concludes that strengthening social ties within rural communities is vital for promoting social stability and economic prosperity. It recommends that community leaders and policymakers enhance social capital as a pathway to sustainable development.