Dinkum Journal of Economics and Managerial Innovations (DJEMI).

Publication History

Submitted: July 07, 2023
Accepted: July 24, 2023
Published: August 01, 2023




Mohammad Mahbub Morshed, Mostafizur Rahman & Monir Ahmmed (2023). Impact of social capital on economic development: a study on Bandarban hill district of Bangladesh perspective. Dinkum Journal of Economics and Managerial Innovations, 2(08):456-467.


© 2023 DJEMI. All rights reserved

Impact of Social Capital on Economic Development: A Study on Bandarban Hill District of Bangladesh PerspectiveOriginal Article

Mohammad Mahbub Morshed 1*, Mostafizur Rahman2, Monir Ahmmed 3

  1. Bangladesh University of Professonals, Dhaka; rafiulhakim@gmail.com
  2. Department of Economics, North South University, Dhaka; mostafizur.rahman14@northsouth.edu
  3. Department of Economics, International Islamic University Chittagong, Chittagong; moniiuc@yahoo.co.uk

*             Correspondence: rafiulhakim@gmail.com

Abstract: Social capital elements of trust and cooperation profoundly affect the economic development of the Bandarban hill district of Bangladesh. “GNI per capita” and “year of schooling” can productively measure these effects.  This paper purposes to examine the impact of social capital elements of trust and cooperation on economic development in the Bandarban hill district in Bangladesh. This paper uses panel data from 38 places in the Bandarban Hill district from 2001 to 2021. This paper uses an econometric model to measure economic development as a dependent variable. Economic development is estimated by GNI per capita and year of schooling. Trust is measured by enterprise profit from weaving, and the agricultural yield from coffee cultivation calculates cooperation. The study employs the Ordinary Least Square (OLS) and Generalized Method of Moment (GMM) techniques. The study revealed that trust and cooperation significantly impact economic development in the case of GNI per capita and year of schooling in the Bandarban Hill district. There is no study on the impact of social capital on economic development in Bandarban in an ethnic context using an econometric model. This paper also suggests that further study can be done to analyze the impacts using other social capital variables like norms of reciprocity, networking, and solidarity.

Keywords: social capital, economic development, ethnicity


Social capital is a crucial component of society’s growth, as it is vital for economic development in micro, medium, and macro-level organizations [1]. It predates human civilization and is defined as intangible assets like kindness, communion, compassion, and social contact among people and relations. Social capital is linked to commercial output and has been studied extensively in various fields, including watershed management, agricultural trading, community-based water projects, voluntary solid waste management, ethnicity, ethnic conflict, and development assistance [2, 3]. Modern economic growth applies the social capital component to companies, institutions, administrative areas, countries, ethnicities, and more. Multi-ethnic regions have different social capital creation than mono-ethnic regions, and states’ multi-ethnic contexts vary [4]. Bangladesh, a predominantly Bengali-speaking country, has a diverse social capital landscape due to factors such as culture, dislocation, migration, surroundings, socioeconomic underdevelopment, insurgency, and military acts. The Chittagong Hill Tracts (CHT) Peace Accord (CHTPA) signed in 1997 ended 23 years of turmoil, but the peace treaty divides local political groups, contributing to low-level fighting. Ethnic and Bengalese regional parties still exist, and law enforcement is concerned about the JSS-UPDF power struggle. Bengalese political groups, including Somo Adhikar Andolan, Parbattya Bangalee Chattra Parishad, and Jana Samhati Samiti, are trying to maintain their power [5-7]. There are several socioeconomic and social capital studies on the Bandarban District of Bangladesh, but none use an econometric model to examine how social capital affects ethnic economic growth. Social capital’s implications on economic growth are unknown [8-10]. Many works on comparative studies of social capital aspects in ethnic settings between nations, regions, places, and entities might determine the best strategy to employ social capital for development. This social capital effectiveness test will help the Bandarban District of Bangladesh establish a social capital plan to maximize its economic performance. Negative factors were reduced while good factors that has increased social capital. Government agencies, local communities, international organizations, NGOs, and others may improve the region’s socioeconomic growth by understanding social capital stocks and their effects. This study has also assisted ethnic-prone communities develop by exchanging experiences. The main aim of this study was to determine social capital affects Bandarban’s economy and also assess Bandarban’s ethnic economic growth utilizing trust and collaboration and social capital.


Trust and authority are essential components of social capital, which is a network of sustained connections and recognition that enriches society [11]. Trust is essential for political and social trust, and countries with stronger social capital have better political confidence. Trust in clubs, cooperatives, and other organizations can lead to better political confidence. Trust also fosters solidarity, which means respecting others’ interests and resources. Trust in organizations, memberships of local surrounds, and the professional community can improve possession sharing, public capital, and creditor-debtor relations. Trust fosters community-driven economic growth, aiding the government [12]. Trustworthiness among business farm partners leads to development and revenues for organizations, while credit is less common than equity in developing countries. Trust between strangers, especially among randomly picked individuals, is crucial for economic development. Trust reduces doubt, ambiguity, and misunderstandings between partners, especially for ethnic communities that feel left out and don’t see themselves as part of the economy [13-15]. Collaborative actions and reciprocity norms are essential for economic development through collective actions and cooperation. Social trust minimizes transaction costs and promotes collaboration, with symmetrical/particular or generalized/distributed reciprocity. Social interactions reduce cumulative acts and foster trust. Reciprocity and economic growth are linked to reciprocity, which improves project management and maintenance. High-social-capital areas prosper through public-private partnerships or self-help programs. Collaboration is also crucial for social capital, as it connects with civic involvement and political organizations [16]. Social networks can be horizontal or vertical, with horizontal networks linking persons in an organizational power hierarchy and horizontal networks linking people of equal rank and authority. A strong ethnic affinity may only benefit one group. Estimating nonmember costs is necessary to balance bonding (Olson 1982). The 1990 Citizen Participation Study (CPS) found that union, farm, church, and other association members are more politically tolerant than nonmembers in ethnically diverse African countries. Veterans and ethnic groups are less tolerant than nonmembers [17]. High earners influence others. Burger, Collier, and Gunning [18] found that Kenyan rural families led by women differ significantly from those headed by males. Language and ethnicity affect income owing to information flow. Similar backgrounds tend to associate, which may prevent the more informed group from connecting with the less knowledgeable group and vice versa. Pooling is retroactive because intellectual associations get more knowledge than the poor [19]. Strong intra-ethnic relationships may benefit the same ethnic group but hinder inter-ethnic engagement [20]. Ethnic divide and inequality delay progress through affecting trust, economic governance, and social coherence [21]. According to Collier [22], an ethnically diverse democratic society profits more since it has more conflict resolution options. His diverse sample of 94 nations (1960-90) shows that countries without free speech had worse growth. Bandarban’s people trust highest. Different ethnicities trust strangers, showing a high level of trust. Bandarban has fewer ethnic confrontations than other CHT Districts due to increased trust in strangers. Except for government-opposed separatist terrorism, Bandarban has not had major ethnic confrontations that killed many people. Thus, security personnel have intervened less in CHT districts. Since governments can spend more on development, they can interfere. Cooperation helps ethnic communities share authority for project management, improving service to the public. The combined and synergistic effect of trust and cooperation among people helps bring economic development to Bandarban.

Figure 01: Elements of social capital

Figure 01: Elements of social capital



Social capital is used in this Bandarban ethnic community research. Econometric models evaluate economic growth utilizing social capital. Economic Development is a dependent variable assessed by HDI components like schooling and GNI per capita. We utilize enterprise earnings for trust and coffee production in the Bandarban hill district for collaboration. This quantitative study uses interviews and questionnaires. It also supports the research with qualitative data. This study examined how social capital affects Bandarban District’s economy.It includes inhabitants from 38 Bandarban hill district settlements in 6 administrative Upazilas. Many ethnicities were researched in various settings. The ethnically diverse Bandarban hill district is the research area.  A mixed method was used, incorporating Quantitative and Qualitative data. Quantitative techniques was used to verify the data collected by qualitative studies, especially on selected indicators.

EconDevit = 𝛽0+ 𝛽1 Trustweavingit + 𝛽2 CoOp_CoffeeProdit+ εtit

Here, EconDev= Economic Development

Trustweaving = Trust between communities measured by weaving as enterprise profit

CoOp_CoffeeProd = Cooperation between or among communities measured by using production or yield from coffee

The variables used are presented below:

 Variables Definitions Sources of data/ information Expected Signs
Economic Development Economic Development in terms of GNI per capita and Year of Schooling Survey Positive
Enterprise Profit Profit from weaving Survey and FGD Positive
Agricultural Production Coffee Production Survey and FGD Positive

4.1 Statistical analysis

Social capital growth ensures economic growth. This research examines trust’s social capital as company profit (weaving) and collaboration as agriculture productivity (coffee). Social capital increases business profit and agricultural productivity. Enterprise profit and agricultural production will rise, boosting economic development and social capital. HDI can measure economic development. HDI incorporates average schooling years, projected schooling years, life expectancy at birth, and GNI per capita (https://hdr.undp.org/data-center/human-development-index#/indicies/HDI). This study eliminates expected schooling and birth life expectancy. Average schooling years from 2001-2021 exclude projected schooling years. Non-availability eliminates life expectancy statistics. This analysis uses GNI per capita and education statistics because of data availability. Ethnicity influences Bandarban’s economic development more than schooling (Fig. 2).

Figure 2: Economic Development is influenced mainly by GNI Per Capita

Figure 2: Economic Development is influenced mainly by GNI Per Capita (Source: Author’s Computation)

Mean Year of schooling data from both primary and secondary sources (Bandarban Yearbook, 2001-2021, Bangladesh Bureau of Statistics) shows that there are only 3-4 years of schooling for the population, which has not be a standard measurement for economic development. So, in this case, for measuring economic development, only GNI per capita was taken.

Figure 3: Economic Development (Year of Schooling) in Bandarban 2001-2021

Figure 3: Economic Development (Year of Schooling) in Bandarban 2001-2021(Source: Author’s Computation)

Trust is found to be the most important social capital element for Bandarban, while cooperation has less impact on economic development. Trust, shown as enterprise profit from weaving, has profoundly more impact on the economic development of Bandarban than cooperation from coffee production (Fig 4).

Figure 4: Trust is a more critical factor for Economic Development (Source: Author’s Computation)

Figure 4: Trust is a more critical factor for Economic Development (Source: Author’s Computation)

Figure 5: Economic Development (GNI Per Capita in Bandarban 2001-2021)

Figure 5: Economic Development (GNI Per Capita in Bandarban 2001-2021) (Source: Author’s Computation)

Economic Development (GNI per capita) is at a lower static state up to the 6th year, while from the 8th year GNI per capita has fluctuated number of times to and from the upper and lower level. From 2020 it shows an upper trend till 2021 (Fig 5).

Figure 6: Weaving Profit in Bandarban 2001-2021

Figure 6: Weaving Profit in Bandarban 2001-2021 (Source: Author’s Computation)

Weaving profit (trust), an enterprise profit aspect of social capital, is observed to be lower static up to the 6th year. Since the 8th year, weaving profit has varied between high and poor levels. (Fig 6). Trust (weaving profit) and economic progress (GNI per capita) are related in Fig 5 and 6. Trust (weaving profit) enhances economic development (GNI per capita) and vice-versa. Trust and economic growth are significantly associated in Bandarban.

Figure 7: Coffee Production in Bandarban 2001-2021

Figure 7: Coffee Production in Bandarban 2001-2021(Source: Author’s Computation)

Fig 7 shows coffee production over the year, considered agricultural production (cooperation), fluctuated several times to and from the upper and lower levels. From 2018 it shows an upper trend till 2021 (Fig 7). Economic Development in the case of GNI per capita (economic development) is impacted by coffee production (cooperation). However, the coffee production trend is flatter than the weaving profit (trust) in recent years. So, enterprise profit (trust/weaving) is a more influential factor for economic development (GNI per capita) than cooperation (coffee production).

4.2  Descriptive Statistics of study variables

Table 1: Descriptive statistics

 Variable Observation  Mean  Std. Dev.  Min  Max
 EDGNI PerCapita 798 19585.18 34158.428 228.769 262076.65
 Edyearofschooling 798 1.516 .686 1 4
 Trustweaving 797 20988.88 33568.708 2004 264090
 CoOp CoffeeProd 798 111.758 78.681 35 800

Table 2: Tabulation of Areas

Area Name Freq. Percent Cum.
Alekhyang 21 2.63 2.63
Ali Kadam 21 2.63 5.26
Aziznagar 21 2.63 7.89
Baishari 21 2.63 10.53
Balipara 16 2.01 12.53
Bandarban Paurashava 21 2.63 15.16
Bandarban Sadar 21 2.63 17.79
Chokhyong 21 2.63 20.43
Cini para 21 2.63 23.06
Dochhari 21 2.63 25.69
Faitang 21 2.63 28.32
Fashyakhali 21 2.63 30.95
Ghandung 21 2.63 33.58
Gozalia 21 2.63 36.22
Happyhill para 21 2.63 38.85
Kuhalong 21 2.63 41.48
Lama Pourashova 21 2.63 44.11
Lama Sadar 21 2.63 46.74
Lama Union 21 2.63 49.37
Mitakhali para 21 2.63 52.01
Mithakhali para 21 2.63 54.64
Naikhongchhari 21 2.63 57.27
Notun Romju para 21 2.63 59.90
Nowapatang 21 2.63 62.53
Paindu 21 2.63 65.16
Pathui para 21 2.63 67.79
Punarbashon Tripura para 21 2.63 70.43
Punarbashon para 5 0.63 71.05
Rajbila 21 2.63 73.68
Remakry 21 2.63 76.32
Ruma Sadar 21 2.63 78.95
Rupshipara 21 2.63 81.58
Rwangchhari 21 2.63 84.21
Soroi 21 2.63 86.84
Suwalok 21 2.63 89.47
Tarachha 21 2.63 92.11
Thanchi 21 2.63 94.74
Tindu 21 2.63 97.37
Tonkaboti 21 2.63 100.00
Total 798 100.00

Table 3: Linear regression (OLS)

 EDGNI_PerCapita  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig.
Trustweaving .989 .008 116.39 0 .972 1.006 ***
CoOp_CoffeeProd 24.295 3.623 6.71 0 17.183 31.407 ***
Constant -3866.472 528.943 -7.31 0 -4904.764 -2828.179 ***
*** p<.01, ** p<.05, * p<.1

Here we see that a 1% increase in trust will increase Economic Development (GNI Per Capita) by 98.9% at a 99% significance level and a 1% increase in cooperation will increase Economic Development (GNI Per Capita) by 2429.5% at 99% significance level.

Table 4: Regression results (GMM)

 EDGNI_PerCapita  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig.
Trustweaving .99 .009 108.33 0 .972 1.008 ***
CoOp_CoffeeProd 26.792 3.956 6.77 0 19.039 34.545 ***
Constant -4168.529 573.596 -7.27 0 -5292.756 -3044.301 ***
*** p<.01, ** p<.05, * p<.1

Here we see that a 1% increase in trust will increase Economic Development (GNI Per Capita) by 99% at a 99% significance level, and a 1% increase in cooperation will increase Economic Development (GNI Per Capita) by 2679.2% at a 99% significance level.

Table 5: Linear regression (OLS)

 EDyearofschooling  Coef. St.Err.  t-value  p-value  95% Conf.  Sig.
Trustweaving 0 0 -1.98 .048 0 **
CoOp_CoffeeProd .002 0 7.12 0 .002 ***
Constant 1.306 .044 29.97 0 1.221 ***

Table 6: Economic Development-GNI Per Capita

Variables OLS GMM
Trust 0.989***




Cooperation 24.295***




Table 7: Economic Development-Year of Schooling

Variables OLS GMM
Trust 0.00**




Cooperation 0.002***





p-values in parentheses

* p<0.05, ** p<0.01, *** p<0.001

Source: Author’s Computation

Weavers are increasingly helping one other maintain and build their enterprises. 15% of company owners may earn from Covid-19 pandemic loans from friends, family, and neighbors. Trusting one other in a crisis is shown by 7% of weavers contacting relatives for help. Weavers embrace honesty and transparency in relationships. Weavers have the confidence to succeed because society has a strong belief system. Weavers may confidently continue their enterprises knowing that their friends and relatives will help them in times of need. This trend will eventually reduce business uncertainty, increasing return on investment (FGD from Survey Question). Another element that promotes business activity is the availability of loans from government and commercial banks (KII-Lusai). Selling things without worrying about their failure is achievable due to a powerful marketing channel. Because of a strong intra- and inter-ethnic marketing channel. Communities sell produced things. When supplies are high, local marketplaces sell to nearby residents and visitors. Locals and visitors buy blankets, mufflers, bed sheets, handkerchiefs, and other products in this category. It’s also sent to Chittagong, Cox’s Bazar, and Dhaka. Neighbors accept one other’s suggestions because they feel they are not attempting to undermine their business by proposing an unproductive person. Their belief in neighbors’ advice shows compassion and trust. Neighbors are also recommending people for employment, emphasizing efficiency and professionalism. This shows that they do not favor family members when hiring weaving workers. Despite the COVID-19 pandemic, Bandarban’s weaving community is flourishing. This helps Bandarban’s economy and job growth. Numerous groupings interact heterophyllously. Survey results showed that 93.75 percent of coffee producers borrowed from neighbors and 40 percent from family members, showing considerable collaboration. After a harvest disaster, they relied on neighbors as a community leadership tradition. Response to a question about aid. This tight relationship between leaders and community members, as well as between community members, encourages collaboration, coffee output, and economic growth. They may maintain coffee production by borrowing money from locals because their relatives tend to most of the crop fields. They help each other understand coffee demand and supply. They created community-based coffee manufacturing technologies because they sell coffee within and outside their communities. This strengthens community relationships.


This paper examines how social capital components affect Bandarban hill area economic growth. This is achieved using an OLS and GMM econometric model. Social capital—trust and cooperation—is linked to ethnic economic growth. The Bandarban ethnic minority relies heavily on weaving and coffee cultivation. Intra- and inter-ethnic social capital of trust and collaboration has created a strong market mechanism, supply chain system, and investment-friendly climate for economic development. To boost weaving profits, a simple SME financing mechanism might be implemented. Weaving instruction will increase their talents. Government subsidies might boost coffee production. Use of hillside property can reduce coffee imports. Coffee and weaving producers will benefit from a strong distribution network. Coffee sub-genre research may uncover new coffee sub-genres.


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Publication History

Submitted: July 07, 2023
Accepted: July 24, 2023
Published: August 01, 2023




Mohammad Mahbub Morshed, Mostafizur Rahman & Monir Ahmmed (2023). Impact of social capital on economic development: a study on Bandarban hill district of Bangladesh perspective. Dinkum Journal of Economics and Managerial Innovations, 2(08):456-467.


© 2023 DJEMI. All rights reserved