Familiarity Breeds Contagion

Agarwal, S and Murlidharan, A and Nishesh, N and Tantri, P L (2020) Familiarity Breeds Contagion. Working Paper. SSRN.

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Abstract

Although the impact of social ties on credit markets has been studied, the possibility of contagion through social ties remains unexplored. Examining the Indian caste system and the group loan structure, we find that social ties could turn shocks into a contagion within credit markets: a drought that directly impacts farmers leads to a higher default rate among non-farmers of the farming castes. We find such results even in more generalized settings. Using group X time fixed effects, we absorb the selection of groups by the borrowers. In the absence of negative shocks, consistent with superior information, caste networks outperform.

Affiliation: Indian School of Business
ISB Creiators:
ISB Creators
ORCiD
Tantri, P L
UNSPECIFIED
Nishesh, N
UNSPECIFIED
Murlidharan, A
UNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Caste, Contagion, Social Networks, Group Loans, Information
Subjects: Finance
Depositing User: Gurusrinivasan K
Date Deposited: 17 May 2021 13:41
Last Modified: 17 May 2021 13:41
URI: https://eprints.exchange.isb.edu/id/eprint/1507
Publisher URL: https://dx.doi.org/10.2139/ssrn.3509386
Publisher OA policy: https://dx.doi.org/10.2139/ssrn.3509386
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