Abstract. We examine how participation in a microfinance program diffuses through social networks, using detailed demographic, social network, and participation data from 43 villages in South India. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, the "injection points." Microfinance participation is significantly higher when the injection points have higher eigenvector centrality. We also estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and nonparticipants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants. However, information passing by non-participants is still substantial and significant, accounting for roughly one-third of informedness and participation. We also find that, once we have properly conditioned on an individual being informed, her decision to participate is not significantly affected by the participation of her acquaintances.JEL Classification Codes: D85, D13, G21, L14, O12, O16, Z13

Abstract. We examine how participation in a microfinance program diffuses through social networks, using detailed demographic, social network, and participation data from 43 villages in South India. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, the "injection points." Microfinance participation is significantly higher when the injection points have higher eigenvector centrality. We also estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and nonparticipants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants. However, information passing by non-participants is still substantial and significant, accounting for roughly one-third of informedness and participation. We also find that, once we have properly conditioned on an individual being informed, her decision to participate is not significantly affected by the participation of her acquaintances.JEL Classification Codes: D85, D13, G21, L14, O12, O16, Z13

Is it possible to identify individuals who are highly central in a community without gathering any network information, simply by asking a few people? If we use people's nominees as seeds for a diffusion process, will it be successful? We explore these questions theoretically, via surveys, and via field experiments. We show via a model of information flow how members of a community can, just by tracking gossip about others, identify highly central individuals in their network. Asking villagers in rural Indian villages to name good seeds for diffusion, we find that they accurately nominate those who are central according to a measure tailored for diffusion -not just those with many friends or in powerful positions. Finally, we run a randomized field experiment in 213 other villages that tests how effective it is to use such nominations as seeds for a diffusion process. Relative to random seeds or those with high social status, hitting at least one seed nominated by villagers leads to more than a 65% increase in the spread of information.JEL Classification Codes: D85, D13, L14, O12, Z13