Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia
AbstractWe use a unique data-set from Indonesia on what individuals know about the income distribution in their village to test theories such as Jackson and Rogers (2007) that link information aggregation in networks to the structure of the network. The observed patterns are consistent with a basic diffusion model: more central individuals are better informed and individuals are able to better evaluate the poverty status of those to whom they are more socially proximate. To understand what the theory predicts for cross-village patterns, we estimate a simple diffusion model using within-village variation, simulate network-level diffusion under this model for the over 600 different networks in our data, and use this simulated data to gauge what the simple diffusion model predicts for the cross-village relationship between information diffusion and network characteristics (e.g. clustering, density). The coefficients in these simulated regressions are generally consistent with relationships suggested in previous theoretical work, even though in our setting formal analytical predictions have not been derived. We then show that the qualitative predictions from the simulated model largely match the actual data in the sense that we obtain similar results both when the dependent variable is an empirical measure of the accuracy of a village's aggregate information and when it is the simulation outcome. Finally, we consider a real-world application to community based targeting, where villagers chose which households should receive an anti-poverty program, and show that networks with better diffusive properties (as predicted by our model) differentially benefit from community based targeting policies.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18351.
Date of creation: Aug 2012
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- Vivi Alatas & Abhijit Banerjee & Arun G Chandrasekhar & Rema Hanna & BENJAMIN A Olken, 2012. "Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia," Working Papers id:5106, eSocialSciences.
- Alatas, Vivi & Banerjee, Abhijit & Chandrasekhar, Arun G. & Hanna, Rema & Olken, Benjamin A., 2012. "Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia," Working Paper Series rwp12-043, Harvard University, John F. Kennedy School of Government.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-NET-2012-09-09 (Network Economics)
- NEP-URE-2012-09-09 (Urban & Real Estate Economics)
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