The Effect of Financial Access on Networks: Evidence from a Field Experiment in Nepal
Abstract: We study how an exogenous expansion in formal financial access affects the structure of the network of financial transactions. We use a unique panel dataset that contains detailed information on the network of financial transactions before and after a field experiment that randomly gave access to a savings account to half of the households in 19 slums in Nepal. We provide evidence that the intervention has affected the network of financial transactions, and we show that not taking this network change into accounts bias downwards the estimates of a standard peer effect model. While previous literature has mostly taken the network structure as exogenous, our paper attempts to shed light on the individuals strategic incentives to link formation.