Does industrialization build or destroy social networks?

This article estimates the relationship between changes in industrialization and changes in social networks measures in Indonesia during 1985-97 using repeated cross sections of nationally representative surveys. The authors analyze a rich set of social interaction measures, including various measures of voluntary associational activity, levels of trust, and informal cooperation. Districs that experienced rapid industrialization showed significant increases in most measures of social interaction. However, districts that neighbor rapidly industrializing areas exhibited high rates of out-migration, significantly fewer community credit cooperatives, and a reduction in "mutual cooperation" as assessed by village elders. Manufacturing growth can be thought of as a proxy for income here. The findings are contrary to several recent claims regarding the role of social capital in economic development. (DSE/GIGA)