The Evolution of Networks During the Development Process: Evidence from Rural Gambia

Simon Heß¹, Dany Jaimovich¹, Matthias Schündeln¹

This paper sheds light on the question of how the process of economic development affects interactions in economic and social networks. We study networks of exchanges in rural villages of The Gambia, West Africa, in the context of a randomized program that directly allocates resources of an economically significant magnitude to villages. We find significantly fewer exchanges in treatment villages, but no evidence for heterogeneous program effects. We investigate several possible mechanisms, and our findings are most consistent with a village-level transformation process from a gift economy to a more formal economy (Kranton, 1996). Regarding development interventions, our findings suggest the networks-channel as an avenue through which programs may have unintended consequences that should be considered when costs and benefits are evaluated.