From Micro to Macro in an Equilibrium Diffusion Model

Working Paper
Published on 1 January 2023

Three previous versions of this paper were published in October 2020, July 2022 and January 2023 respectively.


We quantify the benefits of better firm-to-firm matching in an aggregate diffusion model where individuals reap profitable knowledge from others in the economy. We estimate the model using a recent empirical evaluation of a small-scale program in Kenya that creates new opportunities for firm managers to interact. Critical to the aggregate gains from the program is the relative importance of meeting a high-knowledge firm compared to the learning that happens within that meeting. We show how moments from the intervention identify these diffusion parameters. Doing so formalizes how other easily-estimated moments besides the average treatment effect provide crucial information about at-scale gains. We lastly provide sufficient conditions under which the same identification procedure holds for a wider class of experiments and aggregate diffusion models that covers much recent work.


Wyatt Brooks

Arizona State University

Kevin Donovan

Yale University

Terence R. Johnson

University of Virginia