Working Paper: NBER ID: w8979
Authors: D. Lee Heavner; Lance Lochner
Abstract: This paper analyzes individual decisions to participate in an activity and the aggregation of those decisions when individuals gather information about the outcomes and choices of (a few) others in their social network. In this environment, aggregate participation rates are generally inefficient. Increasing the size of social networks does not necessarily increase efficiency and can lead to less efficient long-run outcomes. Both subsidies for participation and penalties for non-participation can increase participation rates, though not necessarily by the same amount. Punishing non-participation has much greater effects on participation rates than rewarding participation when current rates are very low. A program that provides youth with mentors who have participated themselves can increase participation rates, especially when those rates are low. Finally, communities plagued by the flight of successful participants will experience lower short- and long-run participation rates.
Keywords: Social Networks; Participation Decisions; Government Policy
JEL Codes: D8; H0; J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subsidies for participation (H20) | participation rates (J22) |
| penalties for nonparticipation (Z28) | participation rates (J22) |
| penalties for nonparticipation > subsidies for participation when initial rates are low (H29) | participation rates (J22) |
| mentorship programs (M53) | participation rates among youth (I24) |
| outflow of successful participants (F22) | lower participation rates (J49) |