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Peer Effects in Endogenous Networks

  • Timo Hiller


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    This paper presents a simple model of strategic network formation with local com- plementarities in effort levels and positive local externalities. Equilibrium networks display - other than the complete and the empty network - a core-periphery structure, which is commonly observed in empirical studies. Ex-ante homogenous agents may obtain very different ex-post outcomes. These findings are relevant for a wide range of social and economic phenomena, such as educational attainment, criminal activity, labor market participation and R&D expenditures of rms.

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    Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 12/633.

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    Length: 26 pages
    Date of creation: Nov 2012
    Date of revision:
    Handle: RePEc:bri:uobdis:12/633
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    1. Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2005. "Peer Effects and Social Networks in Education and Crime," Working Paper Series 645, Research Institute of Industrial Economics.
    2. Antoni Calvó-Armengol & Rahmi Ilkiliç, 2004. "Pairwise-Stability and Nash Equilibria in Network Formation," Working Papers 182, Barcelona Graduate School of Economics.
    3. Case, A.C. & Katz, L.F., 1991. "The Company You Keep: The Effects Of Family And Neighborhood On Disadvantaged Younths," Harvard Institute of Economic Research Working Papers 1555, Harvard - Institute of Economic Research.
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