Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia

48 Pages Posted: 1 Sep 2012

See all articles by Vivi Alatas

Vivi Alatas

World Bank - Jakarta

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Arun G. Chandrasekhar

Stanford University - Department of Economics

Rema Hanna

Harvard University - Harvard Kennedy School (HKS)

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Date Written: August 2012

Abstract

We use unique data from 600 Indonesian communities on what individuals know about the poverty status of others to study how network structure influences information aggregation. We develop a model of semi-Bayesian learning on networks, which we structurally estimate using within-village data. The model generates qualitative predictions about how cross-village patterns of learning relate to different network structures, which we show are borne out in the data. We apply our findings to a community-based targeting program, where villagers chose which households should receive aid, and show that networks the model predicts to be more diffusive differentially benefit from community targeting.

Suggested Citation

Alatas, Vivi and Banerjee, Abhijit V. and Chandrasekhar, Arun G. and Hanna, Rema and Olken, Benjamin A., Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia (August 2012). NBER Working Paper No. w18351. Available at SSRN: https://ssrn.com/abstract=2139272

Vivi Alatas (Contact Author)

World Bank - Jakarta ( email )

Jakarta Stock Exchange Bldg. Tower 2, 12th Floor
Jl. Jend. Sudirman Kav. 52-53
Jakarta, 12190
Indonesia

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-252D
Cambridge, MA 02142
United States
617-253-8855 (Phone)
617-253-6915 (Fax)

Arun G. Chandrasekhar

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Rema Hanna

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-253-6833 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1407 (Phone)

Harvard University - Society of Fellows

Cambridge, MA 02138
United States

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