Civil War and Social Capital: Behavioral-Game Evidence from Nepal

Abstract

Using original behavioral games and survey data from Nepal we find that members of communities with greater exposure to violence during Nepal’s ten-year civil war exhibit significantly greater levels of social capital, measured by subjects’ willingness to invest in trust-based transactions and contribute to a collective good. Our identification strategy exploits communities’ exogenous isolation from the unpredictable path of war. We also offer new causal mechanisms. Previous work has suggested a mechanism at the level of individuals’ preferences. We by contrast hypothesize two community-level causal mechanisms for this relationship. First according to our institutional hypothesis communities that suffered war-related violence were forced to adopt new norms that fostered pro-social behavior. Second, our purging hypothesis conjectures that violence may have caused less pro-social individuals to flee at a higher rate than more pro-social persons, leaving a disproportionately pro-social population in violence- plagued communities. We find strong evidence for a community-level effect and no evidence for the purging hypothesis, suggesting the institutional mechanism is at work. We also find evidence for the individual-preference-based mechanism.

Keywords: conflict, violence, Nepal, social capital, behavioral games, trust game, public goods game, matching, causal inference