UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS EFFECTS OF SOCIAL CAPITAL ON SELFRATED LIFE-SATISFACTION AMONG RESIDENTS: EVIDENCE FROM VIETNAM By TRUONG NGOC ANH THU MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, November 2016 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS EFFECTS OF SOCIAL CAPITAL ON SELFRATED LIFE-SATISFACTION AMONG RESIDENTS: EVIDENCE FROM VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By TRUONG NGOC ANH THU Academic Supervisor: Dr PHAM KHANH NAM HO CHI MINH CITY, November 2016 DECLARATION I hereby declare that the thesis “Effects of social capital on self-rated lifesatisfaction among residents: evidence from Vietnam”, which is submitted to Vietnam – Netherlands Programme, is my original research work All of the contents which are not from my own work are cited carefully and clearly in this thesis I certified that the contents of this thesis have not been and are not being submitted for any other degrees This thesis was done under the supervision and guidance of Dr Pham Khanh Nam Any other contributions to this thesis are presented in the acknowledgement section Signature Truong Ngoc Anh Thu Ho Chi Minh City, 2016 In my capacity as the supervisor of this thesis, I certified that the statements above are true to the best of my knowledge Signature Dr Pham Khanh Nam Date: i ACKNOWLEDGEMENT First, I would like to express my great appreciation and huge thanks to VNP Lecturer Team for their dedication and enthusiasm in teaching and guiding me in studying, giving me so much knowledge and inspiring me in my academic study as well as my career I am so thankful to all of them Second, I would like to express my deep gratitude to Dr Pham Khanh Nam, my research supervisor, for his patient guidance and useful critiques of this research work I would also like to extend my thanks to all of my friends in VNP and VNP Staffs for their great support and helpful activities during my time in VNP Finally, I would not forget to send my deepest thanks to my family, my dear friends who always stand by me and encourages me to keep up with my study objectives I am so grateful to all of above people and many others that I could not name here Thank you very much for supporting me! ii ABSTRACT This dissertation provides an insight into the relationship between self-rated lifesatisfaction and social capital, controlling for some demographic and individual characteristics in rural Vietnam as well as tests the theoretical predictions of the social capital investment model from the data of Vietnam Access To Resources Household Survey in 2014 Social capital is measured as a multidimensional concept including social network, formal institution, cooperation and social trust The results are quite consistent with the predictions, which supports the theory about the social capital investment of Glaeser et al (2002) that people who have higher education would have more investment in their social capital, and being stable in the residence also contributes to their investment of social capital while relatively higher income affects their social network and trust negatively Finally, the association between age and formal institution follows the inverted U-shaped trend Using order probit model on data for 3415 households from twelve provinces in Vietnam, it is found out that there is a significantly positive relationship between social capital in forms of social network, formal institution and cooperation and an individual’s subjective satisfaction However, trust, on the other hand, is examined to be insignificantly associated with a person’s self-rated satisfaction in this research Keywords: social capital, social network, cooperation, formal institution, social trust, happiness, life-satisfaction, order probit model, rural Vietnam iii TABLE OF CONTENTS DECLARATION i ACKNOWLEDGEMENT ii ABSTRACT iii TABLE OF CONTENTS iv LIST OF TABLES vi LIST OF FIGURES vii CHAPTER 1: INTRODUCTION 1.1 PROBLEM STATEMENT 1.2 RESEARCH OBJECTIVES AND QUESTIONS 1.3 RESEARCH SCOPE AND METHODOLOGY 1.4 THESIS STRUCTURE CHAPTER 2: LITERATURE REVIEW THEORETICAL FRAMEWORK 2.1.1 Concept of social capital 2.1.2 Model of social capital investment 2.1.3 Becker and Murphy (2000)’s theory on the relationship between social capital and life-satisfaction 2 PREVIOUS EMPIRICAL STUDIES CHAPTER 3: DATA AND METHODOLOGY 11 3.1 DATA 11 3.2 RESEARCH METHODOLOGY 11 3.2.1 Variable description 11 3.2.2 Econometric model 14 CHAPTER 4: RESULTS AND DISCUSSION 15 4.1 DESCRIPTIVE STATISTICS 15 4.2 RESULTS OF SOCIAL CAPITAL INVESTMENT MODEL 20 4.3 RELATIONSHIP BETWEEN SOCIAL CAPITAL AND SELF-RATED LIFESATISFACTION 24 4.4 ROBUSTNESS TESTS 36 CHAPTER 5: CONCLUSIONS 39 5.1 CONCLUSIONS 39 iv 5.1.1 Concluding remarks from the test of model of social capital investment 39 5.1.2 Concluding remarks from the estimations of relationship between social capital and subjective life-satisfaction 40 5.2 POLICY RECOMMENDATIONS 41 REFERENCES 44 APPENDIX A 48 APPENDIX B THE RESULTS OF ORDER PROBIT ESTIMATIONS 49 v LIST OF TABLES Table 1: Factor analysis of social capital 12 Table 2: Variable Description 13 Table 1: Descriptive statistics 16 Table 2: Correlation coefficients among key variables 18 Table 3: Regression of demographic variables on social capital 23 Table 4: Results of estimations of the relationship between life-satisfaction and social capital 26 Table 5: Results of the test of the impact of relative income on the relationship between life-satisfaction and social capital 30 Table 6: Results of the test of the impact of children on the relationship between satisfaction and social capital 32 Table 7: Results of the test of the impact of the time of living in the same community on the relationship between satisfaction and social capital 34 Table 8: Results of estimations of the relationship between social capital and lifesatisfaction (robustness check) 37 vi LIST OF FIGURES Figure 1: The framework of the relationships among social capital, other dependent variables and life-satisfaction 10 Figure 1: Average life-satisfaction in twelve provinces in 2014 17 Figure 2: The relationship between social network and life-satisfaction 19 Figure 3: The relationship between formal institution and life-satisfaction 19 Figure 4: The relationship between cooperation and life-satisfaction 20 Figure 5: The relationship between trust and life-satisfaction 20 vii knowledge to an individual as well as gives him or her chances to earn more skills, discover his or her strengths, and orient him/her in studying, working or in his or her life Furthermore, education may also improve an individual’s life in health, mindset, thus raising his or her life-satisfaction Making more money also helps to improve the quality of life in health, living standard or increase the feeling of compliment and satisfaction In rural areas, many families give birth to many children so that they will have more work force in the family However, it is contrasted to their expectation, having more children brings them more poverty and difficulties, so that it then reduces their life-satisfaction Being sick and not able to perform normal activities decreases a person’s life-satisfaction too It is easy to understand that being unhealthy does not only affect a person’s physical status but also his or her mental and psychological one, contributing to his or her misery and dissatisfaction 5.2 POLICY RECOMMENDATIONS Since social capital is positively associated with level of life-satisfaction, in order to increase the level of an individual’s life-satisfaction, it is advised to improve social capital of an individual: Firstly, because education has a large impact on social capital, in order to improve the social capital of an individual, it is suggested that the government shall be more focused on education It is encouraged that the government invests in the construction of schools and vocational training colleges which equip students with necessary knowledge and essential skills for their job and life Besides, the quality of teachers shall be more invested and improved so that the students can easily get more practical knowledge as well as well instructed in behaviors and ways of living or working It is said that not only does improving education help to increase the educational level of Vietnamese households, but also it generates the chances for local people to strengthen their social capital Furthermore, schools shall operate more clubs and activities for students to take part in, thus creating a good environment for them to build solid connections with their friends In addition to the benefits bringing to students themselves, those activities may also give their parents opportunities to know each other by attending parental meetings at school, cheering activities, thus widening their social relations and raising their social capital Secondly, it is very critical that after an individual graduating from university or colleges, he or she could find a job with a reasonable salary and good benefits The career 41 centers and universities, colleges shall play a more vital role in the process of introducing jobs to graduates Career centers, universities and colleges shall cooperate with each other to orient the career path to students as well as help them to connect with companies and enterprises so that students can find a suitable job Earning a good wage then helps to increase an individual’s social capital since he or she has money to hang out with friends, attend more activities and meetings Thirdly, the government shall invest more in the public organizations such as youth clubs, culture clubs as it seems that households can gain a good level of social capital at their young age in these activities Nowadays, people spend a lot of time watching television, using mobile phones or many other electronic devices instead of spending time for outdoor activities Hence, these organizations can offer people with the opportunities to meet each other, exchange their ideas and feelings so as to raise their intellect and awareness to social problems as well as tighten their solidarity Fourthly, settling down also contributes to level of social capital To raise social capital, it is advised that government supports to lend households money to encourage them to buy a convenient house or apartment in a good environment in order to settle down for a long time If people live in a community for a long time, they are likely to get familiar with the areas, be close to their friends, and neighbors Therefore, they can have a large network of support which is difficult to gain if they are more mobile Moreover, highly mobile people feel less bonded to the other people at their living place, which may lead to more crime (DiPasquale, D., & Glaeser, E L, 1999) and less trust or cooperation (Halpern, 2001) finds that when people trust each other, the crime is lower while it is illustrated that people trust each other more when people are not highly mobile, which means the community is highly homogenous (Alesina, A and La Ferrara, E., 2000) As for other elements affecting life-satisfaction, health is one of characters which is strongly related with an individual’s life-satisfaction Since many households in rural areas not have habit of going to hospital when they are sick, local government may need to launch a campaign to educate people to go to see the doctors whenever they feel not well instead of staying at home or taking any herbal medicines Moreover, it is suggested that the local government encourages all of households to buy health insurance for all family members since it does help them a lot for hospital and medicine fees The infrastructure of health services and hospital as well as the qualified level of doctors and nurses shall also be 42 improved more More health centers and hospitals should be built so that households can easily get access to those places for treatment In addition to physical health, mental health may even affect more an individual’s level of life-satisfaction Besides some internal elements such as characteristics, psychological illness affecting mental health of an individual, other external ones can be improved by social capital such as network with friends, neighbors, strong sense of family values and ties or the freedom in spirit and beliefs As being found in the estimation results, the environment and people surrounding positively affect the feeling of life-satisfaction of an individual Therefore, local government shall encourage the maintenance of the relationship by commending and rewarding good families who are friendly and supportive in the community Also, all households are allowed to freely follow their own spiritual paths or religions and engage in any spiritual activities provided that those activities not violate the law Finally, in rural areas of Vietnam, people seem to have a wrong notion that having more children will help to increase the work force of the household, thus making more money However, it turns out that more kids will lead to the poverty and difficulties, thus decreasing the level of life-satisfaction of households For this reason, local government shall encourage the households not to give birth to many children Each couple shall have from one to two kids only depending on the condition of the family All people shall be asked to join woman’s clubs or other organizations to be educated about sex protection so as to avoid getting pregnancy which is out of control as well as to have a good reproductive health 43 REFERENCES Alesina, A., & Ferrara, E L (1999) 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Evidence from rural China Social science & medicine, 64(1), 35-49 47 APPENDIX A Table A.1 Level of life-satisfaction in rural Vietnam Hà Tây Đak Lak Đak Nơng Điện Biên Khánh Hòa Lai Châu Lâm Đồng Lào Cai Long An Nghệ An Phú Thọ Quảng Nam TOTAL Not at all pleased Not very pleased Rather pleased Very pleased Average lifesatisfaction 7.41% 7.54% 6.06% 10.57% 2.00% 4.05% 1.37% 1.38% 7.64% 3.90% 16.05% 12.42% 7.73% 36.71% 46.96% 44.70% 58.49% 38.00% 80.41% 34.25% 55.86% 50.64% 67.80% 51.84% 45.15% 51.10% 49.55% 43.48% 46.97% 30.94% 56.00% 15.54% 54.79% 42.07% 32.80% 27.80% 28.68% 37.58% 37.69% 6.33% 2.03% 2.27% 0.00% 4.00% 0.00% 9.59% 0.69% 8.92% 0.49% 3.42% 4.85% 3.48% 1.547920434 1.4 1.454545455 1.203773585 1.62 1.114864865 1.726027397 1.420689655 1.429936306 1.248780488 1.194736842 1.348484848 1.369253294 48 APPENDIX B THE RESULTS OF ORDER PROBIT ESTIMATIONS Figure B.1 Marginal effects of social network and life-satisfaction at the level “rather satisfied” and at mean of the number of friends 49 Figure B.2 Marginal effects of formal association and life-satisfaction at the level “rather satisfied” and at one organization 50 Figure B.3 Marginal effects of cooperation and life-satisfaction at the level “rather satisfied” and at cooperative level 51 Figure B.4 Marginal effects of network and life-satisfaction at the level “rather satisfied”, the number of friends is and the relative income is 0.5 52 Table B.1 The result of regression of interaction term between sex and social capital and life-satisfaction VARIABLES Satisfaction Satisfaction Satisfaction Satisfaction Network Sex & network 0.0307*** (0.00922) -0.00820 (0.0101) Formal network 0.143** (0.0565) -0.0965 (0.0635) Sex & formal network Cooperation 0.147 (0.105) -0.0480 (0.118) Sex & cooperation Trust Sex & trust shortvocational longvocational specializedschool college university master married widowed divorced separated sex age agesquare illdays -0.0290 (0.0582) -0.00644 (0.139) 0.337*** (0.0960) 0.459*** (0.172) 0.668*** (0.147) 0.262 (0.803) 0.193 (0.213) -0.188 (0.218) -0.174 (0.261) -0.586 (0.508) 0.0878 (0.0850) 0.0108 (0.00889) -2.34e-05 (8.05e-05) -0.00218*** -0.00635 (0.0580) 0.0238 (0.138) 0.345*** (0.0962) 0.415** (0.172) 0.711*** (0.147) 0.227 (0.803) 0.207 (0.213) -0.168 (0.218) -0.176 (0.261) -0.662 (0.508) 0.129 (0.0891) 0.0102 (0.00891) -2.61e-05 (8.05e-05) -0.00224*** 53 -0.00262 (0.0580) 0.0101 (0.138) 0.357*** (0.0959) 0.446*** (0.172) 0.730*** (0.147) 0.260 (0.803) 0.229 (0.213) -0.169 (0.218) -0.170 (0.261) -0.624 (0.507) 0.0551 (0.0756) 0.0125 (0.00889) -3.90e-05 (8.06e-05) -0.00228*** -0.108 (0.118) 0.0537 (0.136) -0.00599 (0.0580) 0.0135 (0.138) 0.360*** (0.0959) 0.446*** (0.172) 0.741*** (0.147) 0.219 (0.802) 0.233 (0.213) -0.168 (0.218) -0.158 (0.261) -0.577 (0.507) 0.00133 (0.135) 0.0114 (0.00888) -2.87e-05 (8.05e-05) -0.00226*** (0.000542) (0.000542) (0.000541) (0.000541) -0.0316** -0.0313** -0.0335** -0.0339** (0.0153) (0.0153) (0.0153) (0.0153) totalincome -5.92e-09 -4.07e-09 -3.50e-09 -4.16e-09 (6.10e-09) (6.13e-09) (6.16e-09) (6.14e-09) relativeincome 0.257*** 0.246*** 0.241*** 0.246*** (0.0523) (0.0524) (0.0526) (0.0525) yearsliving 0.00169 0.00146 0.00172 0.00176 (0.00164) (0.00164) (0.00164) (0.00164) averagesatisfaction 1.818*** 1.869*** 1.833*** 1.840*** (0.139) (0.139) (0.139) (0.139) Constant cut1 1.877*** 1.915*** 1.869*** 1.735*** (0.364) (0.365) (0.362) (0.377) Constant cut2 3.681*** 3.710*** 3.662*** 3.526*** (0.367) (0.368) (0.365) (0.380) Constant cut3 5.464*** 5.481*** 5.434*** 5.298*** (0.373) (0.374) (0.371) (0.385) Observations 3,415 3,415 3,415 3,415 Standard errors in parentheses *** p