Characterization of Social Capital Using a Nested Latent Class Model: Case of Rural Areas in Central Malawi

Social capital relates to capital created when a group of individuals or organizations develop the ability to work together for mutually productive gain. Gains in economic performance and innovative capacity depend on the institutional effectiveness of these relationships as measured by the available stock of social capital. Studies on social capital have however, been criticized for failing to account for the multi-dimensional and latent nature of the concept. Using household survey data from Malawi, this study uses latent class analytical methods to explore social capital and how it relates to welfare of people in rural communities in Malawi in Africa. It highlights the usefulness of latent class analytical methods for providing statistically valid information about the characteristics and determinants of social capital. Using the social capital dimensions of trust, participation and volunteering a four class LCA typology was constructed. Around 30% of the sample were classified as ‘trusty participants’, reporting active participation in the socio-economic activities of their communities and a high degree of community and institutional trust. Multinomial logistic regression revealed the covariates of the different typologies of social capital.