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Social networks and interactions in cities

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  • Helsley, Robert W.
  • Zenou, Yves

Abstract

We examine how interaction choices depend on the interplay of social and physical distance, and show that agents who are more central in the social network, or are located closer to the geographic center of interaction, choose higher levels of interactions in equilibrium. As a result, the level of interactivity in the economy as a whole will rise with the density of links in the social network and with the degree to which agents are clustered in physical space. When agents can choose geographic locations, there is a tendency for those who are more central in the social network to locate closer to the interaction center, leading to a form of endogenous geographic separation based on social distance. We also show that the market equilibrium is not optimal because of social externalities. We determine the value of the subsidy to interactions that could support the first-best allocation as an equilibrium. Finally, we interpret our model in terms of labor-market networks and show that the lack of good job contacts would be here a structural consequence of the social isolation of inner-city neighborhoods.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 150 (2014)
Issue (Month): C ()
Pages: 426-466

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Handle: RePEc:eee:jetheo:v:150:y:2014:i:c:p:426-466

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Social networks; Urban-land use; Spatial mismatch; Network centrality;

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Cited by:
  1. Sato, Yasuhiro & Zenou, Yves, 2014. "How Urbanization Affect Employment and Social Interactions," CEPR Discussion Papers 9805, C.E.P.R. Discussion Papers.

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