Network Externalities in Hawala Exchanges

Network Externalities Network Externalities in Hawala Exchangesin Hawala Exchanges

Anamaria Berea Department for Computational Social ScienceCenter for Social Complexity at Krasnow Institute for Advanced StudiesGeorge Mason University 

IntroductionIntroductionWhat is hawala? – exchange mechanism

self-enforced by trust and reputationSimilar to Western UnionMostly associated with certain foreign

remittancesNo data - social network analysisKuran, 2004: specific informal Islamic

institutions lead to lock-in situationsOther business associated with the money

transfer practice

Hawala MechanismHawala Mechanism

Purpose of this researchA methodological proposal on the

empirical observationsCommon-pooling SNA techniques

with nested game theoryNot-empirically exhaustive, but

empirical dataset mapping

Method of AnalysisMethod 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)

Method of AnalysisMethod of Analysis

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

Results and FindingsResults and Findings

Ego Networks in TerrorismEgo Networks in Terrorism

Betwenness Centrality for Betwenness Centrality for LocationLocation

The associated businesses The associated businesses networknetwork

Terrorism Periphery and Terrorism Periphery and Lock-in HypothesisLock-in Hypothesis

MDS with geodesic MDS with geodesic distancesdistances

Degree centrality in the Degree centrality in the correlation matrixcorrelation matrix

DiscussionDiscussionNetwork externalities: drugs, gold,

Dubai and MumbaiLock-in emergence: terrorism in

NWFPHigh Centrality Measures for ObL,

Dawood Ibrahim and TTPThis method of analysis by proxies

and game theory validates conceptual and theoretical publications

Thank you!

Questions?