Does it Pay to Participate?

Ari Perdana, Kostas Matakos, Elizabeth Radin
Public Access Documents

This paper analyzes whether participation in formal and informal community activities helped household in Indonesia mitigating the impact of the 1998 economic crisis. The paper uses the 1997 and 2000 round of Indonesian Family Life Survey (IFLS) to capture the impact of economic crisis on household welfare. The empirical results do not seem to support those hypotheses. Using number of children in each household as instrumental variable to solve the reverse causality and omitted variable bias problems, coefficient for community participation is not statistically significant in explaining changes in household expenditure. The large magnitude and universal nature of the shock might explain why social capital did not help households. However, using probit estimation with the same instrument, we find that participation in community activities increased the probability of households getting government assistance.