Social Capital and Rotating Labor Associations: Evidence from China

Abstract

In this paper I study whether social capital has an effect on household decisions to participate in Rotating Labor Associations (ROLAs) in rural China. I find that households in communities with higher levels of social capital are more likely to participate in ROLAs using household data collected from the Gansu province in China. The presence of village temple prior to 1949 is employed as an instrument for social capital. Numerous falsification exercises are performed to evaluate the efficacy of the instrumental variables approach.