Paper long abstract:

The problem of social capital leads to better understanding of trends and what has been going on in post-Soviet Kazakhstan. This paper focuses on social capital in small and medium business sector in Kazakhstan and its connection with government regulation. It is tested the hypothesis that low level of social capital in the SME sector leads to increase of demand for state regulation, despite the low efficiency of state representatives. Level of trust and self-organization are considered the main components of social capital. The main method used by the author is a survey of small and medium businesses in Kostanai region, Karaganda region and Shymkent region, as well as in the cities of Astana and Almaty. The collected data allow me to argue that the low capacity for self-organization and level of trust among entrepreneurs lead to greater demand for government regulation, although it is not effective.

The main regressions:

Demand for formal institutions = - 0,151* Eval_General + 0,225*Gender +0,08*Age - 0, 081*Education -0,486*North - 0,561*Astana - 0,368*West + ε

The main conclusions:

• General assessment of government is negatively associated with the demand for formal institutions (satiation effect)

• Higher level of education of respondents decreases the demand for formal institutions

• Respondents from the North, West regions and Astana demonstrate lower demand for public institutions than in the South

Demand for government interventions in the market = 0,425 + 0,086* Eval_General + 0,218*EVAL_EXPER + 0,132*TRUST_INSTIT - 0, 096*Education + 0,466*North + 0,003*Workers + ε

Main conclusions:

• General assessment of government is positively associated with the demand for government intervention to the market (more trusted government)

• The same is true about personal experience of dealing with government

• Trust in formal institutions increases demand for government intervention (similarly to the welfare states of Northern Europe)

• Northern respondents demonstrate higher demand for government intervention to the market.

• More educated respondents want less government intervention in the market