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Network Effects and Welfare Cultures

  • Bertrand, M.
  • Luttmer, E.F.P.
  • Mullainathan, S.

This paper empirically examines the role of social networks in welfare participation. Social theorists from across the political spectrum have argued that network effects have given rise to a culture of poverty. Empirical work, however, has found it difficult to distinguish the effect of networks from unobservable characteristics of individuals and areas. We use data on language spoken to better infer an individual's network within an area. Individuals who are surrounded by others speaking their language have a larger pool of available contacts. Moreover, the network influence of this pool will depend on their welfare knowledge. We, therefore, focus on the differential effect of increased contact availability: does being surrounded by others who speak the same language increase welfare more for individuals from high welfare using language groups? The results strongly confirm the importance of networks in welfare participation.

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Paper provided by Princeton, Woodrow Wilson School - Public and International Affairs in its series Papers with number 201.

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Length: 35 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:priwpu:201
Contact details of provider: Postal: PRINCETON UNIVERSITY, WOODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, PRINCETON NEW- JERSEY 08542 U.S.A.
Phone: (609) 258-4800
Web page: http://www.wws.princeton.edu/

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  14. Thomas J. Nechyba, 1999. "Social Approval, Values, and AFDC: A Re-Examination of the Illegitimacy Debate," NBER Working Papers 7240, National Bureau of Economic Research, Inc.
  15. George J. Borjas & Lynette Hilton, 1995. "Immigration and the Welfare State: Immigrant Participation in Means- Tested Entitlement Programs," NBER Working Papers 5372, National Bureau of Economic Research, Inc.
  16. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  17. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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