Networks, Markets, and Inequality
American Economic Review
American Economic Association
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Gagnon, J., & Goyal, S. (2017). Networks, Markets, and Inequality. American Economic Review, 107 1-30. https://doi.org/10.1257/aer.20150635
The interaction between community and markets remains a central theme in the social sciences. The empirical evidence is rich: in some instances, markets strengthen social ties, while in others they undermine them. The impact of markets on inequality and welfare also varies widely. This paper develops a model where individuals in a social network choose whether to participate in their network and whether to participate in the market. We show that individual behavior is defined by the q-core of the network and the key to understanding the conflicting evidence is whether the market and the network are complements or substitutes.
networks, substitutes and complements, welfare, inequality
Julien Gagnon thanks the Gates Cambridge Trust for financial support. Sanjeev Goyal is grateful to the Keynes Fellowship and the Cambridge-INET Institute for financial support.
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External DOI: https://doi.org/10.1257/aer.20150635
This record's URL: https://www.repository.cam.ac.uk/handle/1810/257385