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Social Networks, Neighborhood Effects, and Credit Access: Evidence from Rural Guatemala

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  • Wydick, Bruce
  • Karp Hayes, Harmony
  • Hilliker Kempf, Sarah
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    Abstract

    Summary We measure the extent to which social networks determine sources of credit from a survey of 465 households in western Guatemala. We estimate correlated, contextual, and endogenous effects of networks at the neighborhood, church, and village levels, finding that church networks display endogenous effects in credit access. We calculate an elasticity of social imitation (ESI) indicating if the percentage of people accessing microfinance in a church network doubles, the probability of an individual household accessing microfinance increases by 14.1%, a magnitude similar to our estimated ESIs for televisions and cell phones within church and neighbor networks.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 39 (2011)
    Issue (Month): 6 (June)
    Pages: 974-982

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    Handle: RePEc:eee:wdevel:v:39:y:2011:i:6:p:974-982

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    Web page: http://www.elsevier.com/locate/worlddev

    Related research

    Keywords: microfinance credit markets peer effects social networks Guatemala Latin America;

    References

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    1. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
    2. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
    3. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Michael Kremer & Edward Miguel, 2004. "The Illusion of Sustainability," NBER Working Papers 10324, National Bureau of Economic Research, Inc.
    5. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
    6. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
    7. Timothy Conley & Udry Christopher, 2001. "Social Learning Through Networks: The Adoption of New Agricultural Technologies in Ghana," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 668-673.
    8. John McMillan & Christopher Woodruff, 1998. "Interfirm Relationships and Informal Credit in Vietnam," William Davidson Institute Working Papers Series 132, William Davidson Institute at the University of Michigan.
    9. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
    10. Brock,W.A. & Durlauf,S.N., 2002. "A multinomial choice model of neighborhood effects," Working papers 4, Wisconsin Madison - Social Systems.
    11. Munshi, Kaivan & Myaux, Jacques, 2006. "Social norms and the fertility transition," Journal of Development Economics, Elsevier, vol. 80(1), pages 1-38, June.
    12. Woolcock, Michael & Narayan, Deepa, 2000. "Social Capital: Implications for Development Theory, Research, and Policy," World Bank Research Observer, World Bank Group, vol. 15(2), pages 225-49, August.
    13. Okten, Cagla & Osili, Una Okonkwo, 2004. "Social Networks and Credit Access in Indonesia," World Development, Elsevier, vol. 32(7), pages 1225-1246, July.
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    Cited by:
    1. Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
    2. Bet Caeyers, 2014. "Peer effects in development programme awareness of vulnerable groups in rural Tanzania," CSAE Working Paper Series 2014-11, Centre for the Study of African Economies, University of Oxford.

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