Peer-to-peer lending and bias in crowd decision-making

Area of Science:

• Economics
• Globalization Studies
• Network Analysis

Background:

• The "flat-world" hypothesis suggests globalization promotes economic equality.
• Peer-to-peer (P2P) lending is proposed as a mechanism to equalize opportunities for the global poor.

Purpose of the Study:

• To empirically test the "flat-world" hypothesis using P2P lending data.
• To analyze the evolving flatness of global P2P lending networks and identify influencing factors.

Main Methods:

• Analysis of over 660,000 P2P loans across 220 nations (2005-2013).
• Regression analysis to identify variables associated with network flatness.
• Network simulations incorporating policy, event, and regulatory shocks.

Main Results:

• P2P lending networks are diverging from the "flat-world" ideal, becoming less flat.
• Decreasing flatness correlates with GDP per capita disparities, migration patterns, and colonial history.
• Simulations indicate a potential drift towards flatness, but system welfare depends on key country-pair relationships.

Conclusions:

• P2P lending does not inherently equalize global economic opportunities as hypothesized.
• Network dynamics are shaped by economic, social, and historical factors, challenging simple globalization-equality links.
• The stability and future flatness of P2P networks are sensitive to the interconnectedness of major borrowing and lending nations.