In countries where property rights and the rule of law are poorly enforced, and markets fail or are missing, social networks play a fundamental role. Social connections solve information and commitment problems, which enable individuals to have access to credit and insurance or employers to find employees better suited for the jobs that become available.
But showing that the social networks improve the economic outcomes of their members is a challenge. Recently, richer datasets and new models started to provide greater precision in distinguishing social forces, such as diﬀusion of information, norms, and peer pressure and different ways that they affect economic decisions. These social forces all depend in diﬀerent ways on the network structure.
Regarding the analysis of the network structures themselves, a promising research area is the study of small communities in developing countries. They tend to be relatively closed, thus yielding a holistic view of the patterns of interaction and an unusual degree of control in ﬁeld experiments. The diffusion of microfinance, education, and vaccination are examples of research topics that have been explored recently in field experiments. But many questions are still unanswered. For example, the mechanism through which the network structure affects decisions on migration, social mobility, income inequality, and job allocation are not fully understood and could benefit from further investigation.
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