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An Economic Model of Friendship: Homophily, Minorities and Segregation

Author

Listed:
  • Sergio Currarini

    () (Department of Economics, University Of Venice C� 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.

Suggested Citation

  • Sergio Currarini & Paolo Pin & Matthew O. Jackson, 2007. "An Economic Model of Friendship: Homophily, Minorities and Segregation," Working Papers 2007_20, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2007_20
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    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. 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.
    3. Alison Watts, 2006. "Formation of Segregated and Integrated Groups," Working Papers 2006.127, Fondazione Eni Enrico Mattei.
    4. K. R. Narayanan, 1954. "Freedom in Modern Society," India Quarterly: A Journal of International Affairs, , vol. 10(4), pages 376-381, October.
    5. Friedman, James W, 1973. "Concavity of Production Functions and Non-Increasing Returns to Scale," Econometrica, Econometric Society, vol. 41(5), pages 981-984, September.
    6. Scott E. Page, 2007. "Prologue to The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies," Introductory Chapters,in: The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies Princeton University Press.
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    More about this item

    Keywords

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

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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