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An Economic Model of Friendship: Homophily, Minorities and Segregation

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  • Sergio Currarini

    () (Department of Economics, University Of Venice Cà Foscari and School for Advanced Studies in Venice)

  • Paolo Pin

    (Abdus Salam International Center for Theoretical Physics, Trieste and University of Venice)

  • Matthew O. Jackson

    (Department of Economics, Stanford University and the Santa Fe Institute.)

Abstract

We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals come in different types and have type-dependent benefits from friendships; we examine the properties of a steady-state equilibrium of a matching process of friendship formation. We use the model to understand three empirical patterns of friendship formation: (i) larger groups tend to form more same-type ties and fewer other-type ties than small groups, (ii) larger groups form more ties per capita, and (iii) all groups are biased towards same-type relative to demographics, with the most extreme bias coming from middle-sized groups. We trace each of these empirical observations to specific properties of the theoretical model and highlight the role of choice and chance in generating homophilous behavior. Finally we discuss welfare implications of the model.

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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2007_20.

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Length: 46
Date of creation: 2007
Date of revision:
Handle: RePEc:ven:wpaper:2007_20

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Keywords: Networks; Homophily; Segregation; Friendships; Social Networks; Integration; Diversity; Minorities;

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  1. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  3. Friedman, James W, 1973. "Concavity of Production Functions and Non-Increasing Returns to Scale," Econometrica, Econometric Society, vol. 41(5), pages 981-84, September.
  4. Alos-Ferrer, Carlos, 1999. "Dynamical Systems with a Continuum of Randomly Matched Agents," Journal of Economic Theory, Elsevier, vol. 86(2), pages 245-267, June.
  5. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
  6. Fryer, Roland & Echenique, Federico, 2007. "A Measure of Segregation Based on Social Interactions," Scholarly Articles 2958220, Harvard University Department of Economics.
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