Networks in the Understanding of Economic Behaviors

Abstract

T he explosive changes in our abilities to communicate over distancesspurred by the evolution of communication technologies coupled with increased capabilities of the internet and social media-have made social networks very salient. Thus, it is perhaps more than coincidental that there has been a growth in network-related research that has accompanied the dramatic changes in the wiring of the world. 1Although the increased salience of networks may have awakened people to their importance, there is another more fundamental force that is driving the recent growth in the study of networks in economics. The main impetus is that, as economists endeavor to build better models of human behavior, they cannot ignore that humans are fundamentally a social species with interaction patterns that shape their behaviors. People's opinions, which products they buy, whether they invest in education, become criminals, and so forth, are all influenced by friends and acquaintances. Ultimately, the full network of relationships-how dense it is, whether some groups are segregated, who sits in central positions-affects how information spreads 1 Note that this is not the first revolution in communication that has rewired human interaction, as the world has shrunk many times before: with the advent of letter writing, the telegraph, trains, the telephone, air travel, and others. Evidence from a study of the spread of the Black Death in 14th-century Europe suggests that the average social distance between individuals was much larger centuries ago than today (Marvel, Martin, Doering, Lusseau, and Newman 2013).

A Belief-Based Theory of Homophily

“…Homophily is a widespread phenomenon that has important economic implications, affecting hiring and promotion decisions, the spread of information and educational outcomes (Jackson, 2014). The literature on homophily in economics mostly assumes homophilous preferences and investigates the implications for network structure and economic outcomes (e.g., Schelling, 1971;Alesina and La Ferrara, 2000;Currarini et al, 2009;Golub and Jackson, 2012;Alger and Weibull, 2013), with Baccara and Yariv (2013) and Peski (2008) being notable exceptions.…”

Politician Family Networks and Electoral Outcomes: Evidence from the Philippines

“…Our paper contributes to the literature on the importance of social networks in various contexts (Jackson 2014;Munshi 2014). 3 In particular, networks have been linked to the diffusion of information (Banerjee et al 2013;Alatas et al 2016;Larson and Lewis 2017), conflict outcomes (König et al 2017), and the broader mechanisms of political control (Puga and Trefler 2014;Acemoglu, Reed, and Robinson 2014).…”

Can High-Tech Ventures Benefit from Government Guanxi and Business Guanxi? The Moderating Effects of Environmental Turbulence

“…It indicates that doing business in China requires effective interactions with a particular business network of various stakeholders such as customers, suppliers, partners, and rivals, which is often defined as "business guanxi" [10,28]. Guanxi strategy theory points out that Chinese businessmen often use guanxi to control or influence their business partners because guanxi potentially fosters mutual trust for sharing market information, advice, and resources among network members.…”