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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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    17. 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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