Networks, Markets, and Inequality
American Economic Review · 2017 · Volume 107 · Issue 1
Abstract
The interaction between community and markets remains a central theme in the social sciences. The empirical evidence is rich: in some instances, markets strengthen social ties, while in others they undermine them. The impact of markets on inequality and welfare also varies widely. This paper develops a model where individuals in a social network choose whether to participate in their network and whether to participate in the market. We show that individual behavior is defined by the q-core of the network and the key to understanding the conflicting evidence is whether the market and the network are complements or substitutes.
Keywords
Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Network Formation and Analysis: Theory, Economics of Minorities, Races, Indigenous Peoples, and Immigrants, Non-labor Discrimination, Entertainment, Media, Economic Development: Human Resources, Human Development, Income Distribution, Migration, Economic Sociology, Economic Anthropology, Language, Social and Economic Stratification, Tourism: Industry Studies
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