State-Society Synergy Through Social Capital in Indonesian Community-Driven Development

Abstract

In addition to the potential efficiency gains of decentralization, community-driven development (CDD) programs were expected to empower the poor and marginalized by encouraging their participation in community decision-making. As social capital is recognized as a critical resource for the poor, CDD programs contribute to national poverty-reduction efforts through bottom-up mobilization rather than top-down state-led development initiatives. In this sense, CDD demonstrates how state-society synergy can be realized through the accumulation of social capital. This paper investigates the extent of state-society synergy at the individual/household level in Indonesia using the Indonesian Family Life Survey (IFLS). By controlling for potential selection problems using difference-in-difference methods, this study reveals that the synergetic mobilization of society leads to improved wellbeing. In particular, by controlling for community participation and its spillover effects, it finds that individual participation in the Indonesian CDD program enhanced the material and subjective wellbeing of households. However, this effect was not through the direct benefit of participation in the CDD program; rather, it stemmed from the indirect effects of increased membership in other community activities. Increased interaction among community members consolidated trust within the community and provided increased access to loans when necessary. CDD has the most significant impact on wives’ empowerment within the household.