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Network Externalities in Hawala Exchanges

Network Externalities in Hawala Exchanges. Anamaria Berea Department for Computational Social Science Center for Social Complexity at Krasnow Institute for Advanced Studies George Mason University. Introduction. What is hawala? – exchange mechanism self-enforced by trust and reputation

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Network Externalities in Hawala Exchanges

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  1. Network Externalities in Hawala Exchanges Anamaria Berea Department for Computational Social Science Center for Social Complexity at Krasnow Institute for Advanced Studies George Mason University

  2. Introduction • What is hawala? – exchange mechanism self-enforced by trust and reputation • Similar to Western Union • Mostly associated with certain foreign remittances • No data - social network analysis • Kuran, 2004: specific informal Islamic institutions lead to lock-in situations • Other business associated with the money transfer practice

  3. Hawala Mechanism

  4. Purpose of this research • A methodological proposal on the empirical observations • Common-pooling SNA techniques with nested game theory • Not-empirically exhaustive, but empirical dataset mapping

  5. Method of Analysis 1. Building the datasets by proxies and informational conjectures: - proxy: the Pakistani players in major international business (hawaladars network; Pakistan vs. Afghanistan) - proxy: the pool of countries under scrutiny for remittances by Interpol and UN frozen assets - 3 files: personal ties, business ties and locations (mini-clusters)

  6. Method of Analysis 2. Analyzing the datasets: - nested game hypothesis (Tsebelis, 1991) – correlation matrix - shows the network externalities

  7. Results and Findings

  8. Ego Networks in Terrorism

  9. Betwenness Centrality for Location

  10. The associated businesses network

  11. Terrorism Periphery and Lock-in Hypothesis

  12. MDS with geodesic distances

  13. Degree centrality in the correlation matrix

  14. Discussion • Network externalities: drugs, gold, Dubai and Mumbai • Lock-in emergence: terrorism in NWFP • High Centrality Measures for ObL, Dawood Ibrahim and TTP • This method of analysis by proxies and game theory validates conceptual and theoretical publications

  15. Thank you! • Questions?

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