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Abstract

The influence of informal institutions on economic outcomes for low income individuals and households has received little attention in the United States. Yet, drawing on social capital theory and existing studies from developing countries where informal institutions have been widely used in promoting economic opportunities offamilies in poverty, one would expect these institutions to have positive effects on the economic outcomes of low income individuals in the context of an IDA program. Using a sample of 840 respondents who were enrolled in a community action program, this study assesses the effects of informal networks of social support on performance in a matched savings program. Results show partial support for the hypothesized relationship. Specifically, an increase in the amount of help a respondent gives to members of her community is inversely related to performance in an IDA program. This may imply that although informal networks have mutual benefits for both the individual and community, economically these benefits may be mixed. Among low income individuals saving in an IDA program, participating in such networks may constrain the economic resources available to them or their households; hence impacting their performance negatively.

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