Faculty of Economics and Business Administration Publications Database

Development Projects and Economic Networks: Lessons from Rural Gambia

Selected
Authors:
Heß, Simon
Source:
Volume: 88
Number: 3
Pages: 1347 - 1384
Month: 05
ISSN-Print: 0034-6527
Link External Source: Online Version
Year: 2021
Abstract:

This article investigates the effects of development projects on economic networks. To this end, we study the impact that a randomly allocated Community-Driven Development program in The Gambia has on economic interactions within rural villages. The program provides an exogenous source of variation to village-level stocks of productive capital and to village-wide collective activities. Based on detailed data on economic and social networks, we find a significant reduction of transfers in these networks in treatment villages. Guided by a theoretical framework, we investigate several possible mechanisms and find evidence that is consistent with two channels. First, the evidence points to modest wealth effects and a village-level transformation process towards a more formal economy. Second, we also find evidence that is consistent with elite capture, favouritism, and unequally distributed benefits leading to reductions in social capital and thus economic transactions. Overall, our findings suggest changes in networks as an avenue through which development interventions may have unintended consequences.

back