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Networks, Markets, and Inequality

Julien Gagnon and Sanjeev Goyal

American Economic Review, 2017, vol. 107, issue 1, 1-30

Abstract: 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.

JEL-codes: D63 D85 J15 L82 O15 Z13 Z31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20150635
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