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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 16 / 52





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relationships should be more socially embedded than others. The extra effort and cost of

embedding arising because they constitute a broad informal insurance premium.

Each of the three arguments have points of similarity and overlap but there are also

points of difference that need to be sorted out. While possibly agreeing that social capital

creates a more desirable state of affairs than would exist in its absence, critics might plausibly

claim that embedding is not a particularly efficient manner of dealing with many

contingencies because informal insurance arrangements have their own partner selection and

contract enforcement problems. Individuals may be willing to bear the costs only when they

see the prospect of benefit (Arnott and Stigler 1991; North 1977).

Private orderings in Vietnam

With an estimated population of approximately 80 million and an active labor force of

approximately 38 million, Vietnam is the world’s 40th largest economy, just after Hong Kong

(World Bank 2003). Between 1991 and 2001, Vietnam’s economy grew at an impressive

average annual rate of 7.7 percent (World Bank 2003) making it one of the world’s fastest-

growing economies even if economic growth possibly has a percentage point recently. Over

the past several years, child malnutrition has fallen rapidly, unemployment is low and labor

force participation rates have risen, and poverty rates have fallen rapidly (Haughton 2000),

resulting in relatively broad-based improvements in welfare (Glewwe, Gragnolati, and

Zaman 2002). Moreover, persistent extreme poverty appears to be relatively rare (Baulch

and Masset 2003). Nevertheless, Vietnam remains one of the poorer countries of the world

with approximately half its population living in poverty at any one time and a (constant 1995

dollar) per capita gross domestic product of $390 (World Bank 2003).

Vietnam has a long history of administrative and legal reform stretching back to at


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