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Altruism Networks, Income Inequality, and Economic Relations

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  • Yann Bramoullé

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Rachel E Kranton

    (Duke University [Durham])

Abstract

What patterns of economic relations arise when people are altruistic rather than strategically self-interested? This paper introduces an altruism network into a simple model of choice among partners for economic activity. With concave utility, agents effectively become inequality averse towards friends and family. Rich agents preferentially choose to work with poor friends despite productivity losses. Hence, network inequality-the divergence in incomes within sets of friends and family-is key to how altruism shapes economic relations and output. Skill homophily also plays a role; preferential contracts and productivity losses decline when rich agents have poor friends with requisite skills.

Suggested Citation

  • Yann Bramoullé & Rachel E Kranton, 2022. "Altruism Networks, Income Inequality, and Economic Relations," Working Papers halshs-03558286, HAL.
    • Handle: RePEc:hal:wpaper:halshs-03558286
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03558286
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    References listed on IDEAS

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