IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Social Networks and Interactions in Cities

  • Helsley, Robert


    (University of California, Berkeley)

  • Zenou, Yves


    (Stockholm University and Research Institute of Industrial Economics (IFN), Stockholm, Sweden, and GAINS)

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. Finally, we 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 and show that interaction effort and the incentives for clustering are higher under the subsidy program.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2011:8.

in new window

Length: 25 pages
Date of creation: 14 Feb 2011
Date of revision:
Handle: RePEc:hhs:sunrpe:2011_0008
Contact details of provider: Postal:
Department of Economics, Stockholm, S-106 91 Stockholm, Sweden

Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Paul Frijters & Michael A. Shields & Stephen Wheatley Price, 2005. "Job Search Methods and Their Success: A Comparison of Immigrants and Natives in the UK," Economic Journal, Royal Economic Society, vol. 115(507), pages F359-F376, November.
  2. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," Seminar Papers 695, Stockholm University, Institute for International Economic Studies.
  3. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
  4. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 121-136, January.
  5. Yannis M. Ioannides & Adriaan R. Soetevent, 2006. "Wages and Employment in a Random Social Network with Arbitrary Degree Distribution," Tinbergen Institute Discussion Papers 06-014/1, Tinbergen Institute.
  6. Papke, Leslie E., 1994. "Tax policy and urban development : Evidence from the Indiana enterprise zone program," Journal of Public Economics, Elsevier, vol. 54(1), pages 37-49, May.
  7. Ballester, Coralio & Calvó-Armengol, Antoni & Zenou, Yves, 2005. "Who’s Who in Networks. Wanted: The Key Player," CEPR Discussion Papers 5329, C.E.P.R. Discussion Papers.
  8. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
  9. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2004. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Working papers 2004-07, University of Connecticut, Department of Economics, revised Oct 2005.
  10. Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2008. "Peer Effects and Social Networks in Education," CEPR Discussion Papers 7060, C.E.P.R. Discussion Papers.
  11. Zenou, Yves, 2013. "Spatial versus social mismatch," Journal of Urban Economics, Elsevier, vol. 74(C), pages 113-132.
  12. BRUECKNER, Jan K. & THISSE , Jacques-François & ZENOU, Yves, . "Local labor markets, job matching, and urban location," CORE Discussion Papers RP 1545, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Grauwin, Sébastian & Goffette-Nagot, Florence & Jensen, Pablo, 2012. "Dynamic models of residential segregation: An analytical solution," Journal of Public Economics, Elsevier, vol. 96(1), pages 124-141.
  14. Ghiglino, Christian & Nocco, Christian, 2012. "When Veblen meets Krugman," Economics Discussion Papers 8949, University of Essex, Department of Economics.
  15. Pascal Mossay & Pierre M. Picard, 2009. "On Spatial Equilibria in a Social Interaction Model," CREA Discussion Paper Series 09-02, Center for Research in Economic Analysis, University of Luxembourg.
  16. Brueckner, Jan K. & Largey, Ann G., 2008. "Social interaction and urban sprawl," Journal of Urban Economics, Elsevier, vol. 64(1), pages 18-34, July.
  17. Durlauf, Steven N, 1996. "A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
  18. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521698221, September.
  19. König, Michael & Tessone, Claudio J. & Zenou, Yves, 2012. "Nestedness in Networks: A Theoretical Model and Some Applications," CEPR Discussion Papers 8807, C.E.P.R. Discussion Papers.
  20. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  21. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2010. "Social Interactions and Spillovers," Research Papers in Economics 2010:20, Stockholm University, Department of Economics.
  22. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  23. Verdier, T. & Zenou, Y., 2000. "Racial Beliefs , Location and the Causes of Crime," DELTA Working Papers 2000-26, DELTA (Ecole normale supérieure).
  24. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  25. 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.
  26. Battu, Harminder & Seaman, Paul T & Zenou, Yves, 2005. "Job Contact Networks and the Ethnic Minorities," CEPR Discussion Papers 5225, C.E.P.R. Discussion Papers.
  27. Lawrence F. Katz & Jeffrey R. Kling & Jeffrey B. Liebman, 2001. "Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 607-654.
  28. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
  29. Patacchini, Eleonora & Zenou, Yves, 2012. "Ethnic networks and employment outcomes," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 938-949.
  30. Jan K. Brueckner, 2004. "Friendship Networks," Econometric Society 2004 North American Winter Meetings 184, Econometric Society.
  31. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
  32. Zhang, Junfu, 2004. "Residential segregation in an all-integrationist world," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 533-550, August.
  33. Judith Hellerstein & Melissa McInerney & David Neumark, 2009. "Neighbors and Co-Workers: The Importance of Residential Labor Market Networks," Working Papers 09-01, Center for Economic Studies, U.S. Census Bureau.
  34. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  35. repec:esx:essedp:708 is not listed on IDEAS
  36. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
  37. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 273-299.
  38. Pierre Picard & Takatoshi Tabuchi, 2007. "Self-organized Agglomerations and Transport Costs," The School of Economics Discussion Paper Series 0712, Economics, The University of Manchester.
  39. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  40. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  41. Leo Katz, 1953. "A new status index derived from sociometric analysis," Psychometrika, Springer;The Psychometric Society, vol. 18(1), pages 39-43, March.
  42. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
  43. Jeffrey R. Kling & Jens Ludwig & Lawrence F. Katz, 2005. "Neighborhood Effects on Crime for Female and Male Youth: Evidence from a Randomized Housing Voucher Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 87-130.
  44. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May.
  45. Edward Glaeser, 1997. "Learning in Cities," NBER Working Papers 6271, National Bureau of Economic Research, Inc.
  46. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  47. Helsley, Robert W. & Strange, William C., 2004. "Knowledge barter in cities," Journal of Urban Economics, Elsevier, vol. 56(2), pages 327-345, September.
  48. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
  49. Edward L. Glaeser & Bruce Sacerdote & José A. Scheinkman, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 507-548.
  50. Yannis M. Ioannides, 2012. "From Neighborhoods to Nations: The Economics of Social Interactions," Economics Books, Princeton University Press, edition 1, number 9892, 01-2013.
  51. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
  52. J. Vernon Henderson & Mohammad Arzaghi, 2005. "Networking Off Madison Avenue," Working Papers 05-15, Center for Economic Studies, U.S. Census Bureau.
  53. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," Center for Policy Research Working Papers 56, Center for Policy Research, Maxwell School, Syracuse University.
  54. Robert W. Helsley & William C. Strange, 2007. "Urban interactions and spatial structure," Journal of Economic Geography, Oxford University Press, vol. 7(2), pages 119-138, March.
  55. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  56. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  57. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:sunrpe:2011_0008. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sten Nyberg)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.