Using data on agricultural traders in Madagascar, this paper shows that social capital has a large effect on efficiency. Better connected traders are shown to have significantly larger sales and gross margins than less connected traders after controlling for physical and human inputs. Social network capital enables traders to deal with each other in a more trustworthy manner by granting and receiving credit, exchanging price information, and economizing on quality inspection. Schooling is correlated with the use of superior modes of transaction but needs to be complemented by social network capital. Download full-text discussion paper .
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