Wednesday, April 7, 2010
Where does the money go?
Was chatting recently with Sitabhra Sinha from the Institute of Mathematical Sciences in Chennai, India about some ideas to study the network structure and dynamics of money and information flow in rural Tamil Nadu and he passed along a bunch of papers to me. One of them was Patterns of dominant flows in the world trade web by Serrano, Boguñá and Vespignani. This mix of people from Europe and the U.S. took international trade data and reconstructed the trade network to look at imbalances between countries. They then asked where one dollar generated in any given country ends up being ‘absorbed’ or accumulated in the world. They called this the ‘dollar game’. For big consumer nations like the U.S. no surprise that a big chunk ends up in Japan and China. Where the money ends up accumulating is not completely informative about which country is better off though, since this doesn’t tell you anything about who can generate more currency to begin with. However, it did get me thinking about what it would look like to reconstruct this for rural and urban India and track where our microfinance loan money is ‘absorbed’. My guess is that the rural borrowers are net consumers and much of it ends up in Chennai or Mumbai or someplace like that rather than actually staying in the rural areas. If anyone has data to the contrary (or supporting my guess), I would love to hear about it.