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Network Capital

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  • Akerlof, Robert
  • Holden, Richard

Abstract

This paper explores the problem of assembling capital for projects. It can be difficult to assemble capital, when it is disaggregated, for a project that exhibits increasing returns. Small investors may be reluctant to participate, as they may question the ability of the project owner to raise the additional capital he requires. This suggests the possibility that agents with blocks of capital (capital that is already aggregated) might earn rents. Similarly, agents with "network capital" — that is, an ability to aggregate the capital of others — may earn rents. In this paper, we develop a theory of the rents attached to capital assembly, and discuss the implications for a range of issues from investment, to growth, to inequality.

Suggested Citation

  • Akerlof, Robert & Holden, Richard, 2017. "Network Capital," CEPR Discussion Papers 11763, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11763
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    References listed on IDEAS

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    More about this item

    Keywords

    Network capital; investment; Increasing returns; Inequality;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D30 - Microeconomics - - Distribution - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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