Events at CERGE-EI

Vatsal Khandelwal, Ph.D.

University of Oxford, United Kingdom

Authors: Vatsal Khandelwal, Ronak Jain

Abstract: Inaccurate beliefs about social norms can reduce useful social interactions and adversely affect an individual’s ability to deal with negative shocks. We run a randomised controlled trial with low-income workers living in slums in urban India who lack access to formal financial and healthcare support. We find that the majority of individuals underestimate their community’s willingness to engage in dialogue around financial and mental health concerns. Belief correction leads to a large increase in the demand for network-based assistance. Additional survey experiments show that the effects are primarily driven by a reduction in the perceived costs of violating social norms. Implementation of a hypothetical choice experiment allows us to identify whether these costs are driven by concerns around signalling, reputation, or insensitivity. Then, we structurally estimate a network diffusion model to benchmark the predicted long-run effects of our intervention against counterfactual policies. We predict that our belief correction intervention will not lead to a shift in equilibrium engagement. We compute the strength of counterfactual interventions needed to sustain our effects and find that belief correction can be used to generate both the demand and funding for such policies.

JEL Classification: C93, D83, D91, I12, I31, Z13
Keywords: Social Networks, Social Norms, Beliefs, Risk Sharing, Mental Health

Full Text: Silent Networks: The Role of Inaccurate Beliefs in Reducing Useful Social Interactions