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Networks, Markets, and Inequality

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  • Julien Gagnon
  • Sanjeev Goyal

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.

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  • Julien Gagnon & Sanjeev Goyal, 2017. "Networks, Markets, and Inequality," American Economic Review, American Economic Association, vol. 107(1), pages 1-30, January.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:1:p:1-30
    Note: DOI: 10.1257/aer.20150635
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    References listed on IDEAS

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    Cited by:

    1. Bramoulle, Y. & Goyal, S. & Morelli, M., 2024. "Social Structure, State, and Economic Activity," Cambridge Working Papers in Economics 2416, Faculty of Economics, University of Cambridge.
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    3. Jóna, György, 2020. "Versengő együttműködés versus összejátszás, avagy hálózati szintű csalás? [Coopetition versus collusion, or fraud at network level?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 164-180.
    4. Kor, Ryan & Zhou, Junjie, 2023. "Multi-activity influence and intervention," Games and Economic Behavior, Elsevier, vol. 137(C), pages 91-115.
    5. Wan, Yinglin & Gao, Yuchen & Hu, Yimei, 2022. "Blockchain application and collaborative innovation in the manufacturing industry: Based on the perspective of social trust," Technological Forecasting and Social Change, Elsevier, vol. 177(C).
    6. Chen, Jun & Elliott, Matthew & Koh, Andrew, 2023. "Capability accumulation and conglomeratization in the information age," Journal of Economic Theory, Elsevier, vol. 210(C).
    7. Bene, Tizié & Bramoullé, Yann & Deroïan, Frédéric, 2024. "Formal insurance and altruism networks," Journal of Development Economics, Elsevier, vol. 171(C).
    8. Shixun Wang & Lihong Yang, 2022. "The Network Structure of Innovation Networks," Networks and Spatial Economics, Springer, vol. 22(1), pages 65-96, March.
    9. Belhaj, Mohamed & Deroïan, Frédéric & Safi, Shahir, 2023. "Targeting in networks under costly agreements," Games and Economic Behavior, Elsevier, vol. 140(C), pages 154-172.
    10. Ryan Kor & Junjie Zhou, 2021. "Multi-activity Influence and Intervention," Papers 2106.09410, arXiv.org, revised Nov 2022.
    11. Foltz, Jeremy & Guo, Yunnan & Yao, Yang, 2020. "Lineage networks, urban migration and income inequality: Evidence from rural China," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 465-482.
    12. Xiaoyu Li & Jiahong Yuan & Yan Shi & Tianteng Wang & Xiangpei Hu & Felix Tung Sun Chan & Junhu Ruan, 2020. "An extended Bass Model on consumer quantity of B2C commerce platforms," Electronic Commerce Research, Springer, vol. 20(3), pages 609-628, September.
    13. Alastair Langtry & Sarah Taylor & Yifan Zhang, 2024. "Network Threshold Games," Papers 2406.04540, arXiv.org.
    14. Arun G. Chandrasekhar & Benjamin Golub & He Yang, 2018. "Signaling, Shame, and Silence in Social Learning," NBER Working Papers 25169, National Bureau of Economic Research, Inc.
    15. Zenou, Yves & Bochet, Olivier & Faure, Mathieu & Long, Yan, 2020. "Perceived Competition in Networks," CEPR Discussion Papers 15582, C.E.P.R. Discussion Papers.
    16. Wang, Shixun & Yang, Lihong, 2022. "Spatial competition, strategic R&D and the structure of innovation networks," Journal of Business Research, Elsevier, vol. 139(C), pages 13-31.
    17. Polanski, Arnold, 2024. "Close-knit neighborhoods: Stability of cooperation in networks," Journal of Economic Theory, Elsevier, vol. 215(C).
    18. Dietrich, Stephan & Beekman, Gonne & Nillesen, Eleonora, 2018. "Market integration and pro-social behaviour in rural Liberia," MERIT Working Papers 2018-010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Bochet, Olivier & Faure, Mathieu & Long, Yan & Zenou, Yves, 2020. "Perceived Competition in Networks," CEPR Discussion Papers 15582, C.E.P.R. Discussion Papers.
    20. Walsh, A. M., 2019. "Games on Multi-Layer Networks," Cambridge Working Papers in Economics 1954, Faculty of Economics, University of Cambridge.

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • Z31 - Other Special Topics - - Tourism Economics - - - Industry Studies

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