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Network Effects and Welfare Cultures

  • Sendhil Mullainathan
  • Marianne Bertrand
  • Erzo F.P. Luttmer

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 Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 98-21.

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Date of creation: Oct 1998
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Handle: RePEc:mit:worpap:98-21
Contact details of provider: Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Web page: http://econ-www.mit.edu/

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