Role of Social Networks in Diversification o Income Sources in Rural India

Rural households in developing countries adopt diversification of income sources as a common strategy to stabilize their income throughout the year. We view social networks as an important factor that influences diversification activities. Social interactions may help households to gain ideas, skills, services and information which could influence their decision to diversify their income sources.This paper examines whether household’s social networks influence income diversification in Wayanad District of South India. We develop a network econometric model based on a Spatial Autoregressive econometric approach by replacing the spatial matrix with a network matrix. Our results indicate that the diversification of a household’s social network has a statistically significant positive effect on its income diversification.