The Impact of Rural Development Policy on Social Capital: Measurement, Heterogeneity, and Implications for Collective Action

ABSTRACT In rural development research, social capital (SC) complements the causal gap between the endowment of resources and other capital in a community and the performance of collective actions, such as common‐pool resource management. However, the concept of SC is ambiguous and its measurement is controversial. This study focuses on rural SC and attempts to measure it inductively using data from 994 Japanese communities related to various collective actions (22 types), rather than deductively piling up the detailed components of SC, as in prior studies. In particular, we evaluate the impact of Japan's Multifunctional Payment System (MPS)—a rural development policy designed to support collective agricultural activities such as the maintenance of farm roads and irrigation facilities—on the accumulation of SC. To this end, we employ hierarchical latent variable models to capture the multidimensional and hierarchical structure of SC, and spatial regression models to assess the policy's causal impacts on SC accumulation while considering spatial heterogeneity. The results show that SC has spatial heterogeneity and a hierarchical structure, depending on the internal (bonding‐type) and external (bridging‐type) components, as well as on the difference between general activities and collective agricultural actions. The SC accumulation is strongly correlated with traditional and agriculture‐related activities. Furthermore, policies increase comprehensive SC by approximately 20% but are more effective for internal SC than for external SC. These results suggest the need for policy options such as agglomeration bonuses when expanding the range of collective actions. They also imply that soft projects to strengthen linkages between rural and urban residents (bridging‐type SC) will be important in the future. Other findings indicate that the reinforcement of agricultural corporations and educational facilities are also effective in accumulating SC.