ABSTRACT
Recent years have seen a growing interest on behalf of economists and other social scientists in the role played by groups in the process of economic development. Drawing upon the conceptual framework of Putnam (1993), some studies have looked at civic engagement in a variety of associations, including recreational and socio-political ones, to argue that the mere participation in such groups can have an economic impact by providing opportunities for members to share information, enforce informal transactions, and coordinate on cooperative outcomes. 1 Other studies have focused on the role of groups in the informal credit market and have analyzed their incentive schemes and economic performance. 2 For some of the poorest individuals in developing countries, however, groups are more than socio-political associations or saving devices: they are “employers.” People who do not have access to the formal labor market and whose options in the informal market are relatively unattractive can often benefit from pooling resources and working in groups. To what extent can informal groups constitute a reliable source of income for the poor? What factors affect group performance, and in particular, how does the “social” composition of the group affect the organization of production and the allocation of resources to members?
