Working Paper: CEPR ID: DP8770
Authors: Abhijit Banerjee; Arun G Chandrasekhar; Esther Duflo; Matthew O Jackson
Abstract: We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances.
Keywords: diffusion; microfinance; peer effects; social networks
JEL Codes: D13; D85; G21; L14; O12; O16; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial injection points (higher eigenvector centrality) (Z13) | microfinance participation (O16) |
| microfinance participation (O16) | information dissemination (L86) |
| non-participants (L39) | information dissemination (L86) |
| informed individuals (D83) | participation decision (D70) |