Information Shocks and Social Networks

Abstract

The relationships between social networks and economic behavior have been well-documented. However, it is often difficult to distinguish between the role of sharing and other features of a neighborhood, such as factors that are common to people of the same ethnicities or socio-economic opportunities, or uniquely local methods of program implementation. We seek to gain new insight into the potential role of flows in networks by investigating what happens when is disrupted. We exploit rich microdata from Florida vital records and program participation files to explore the effects of neighborhood social networks on the degree to which immigrant WIC participation during pregnancy declined in the information period surrounding welfare reform. We compare changes in WIC participation amongst Hispanic immigrants living in neighborhoods with a larger concentration of immigrants from their country of origin to those with a smaller concentration of immigrants from their country of origin, holding constant the size of the immigrant population and the share of immigrants in the neighborhood who are Hispanic. We find strong evidence to support the notion that social networks mediated the shock faced by immigrant women in the wake of welfare reform.