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

  • Wydick, Bruce
  • Karp Hayes, Harmony
  • Hilliker Kempf, Sarah
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    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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    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X11000507
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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    1. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
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    8. 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.
    9. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
    10. 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.
    11. 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.
    12. McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
    13. Okten, Cagla & Osili, Una Okonkwo, 2004. "Social Networks and Credit Access in Indonesia," World Development, Elsevier, vol. 32(7), pages 1225-1246, July.
    14. 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.
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