Essays on social networks

Abstract

This thesis explores the role of social networks in economic decision making. In the first chapter I am interested in optimal targeting in networks. In particular, I analyze what happens when two opposing lobby groups consider the politician not only as an individual, but as part of a network, who influences other politicians. I model the network structure explicitly and allow for heterogeneous politicians, that is politicians can be in favour of one of the lobby groups or neutral. The optimal targeting strategy depends on how much politicians influence each other, the magnitude of their bias, their centrality in the network and what bias the politicians connected to them have. In the second chapter, we build a theory that connects differences in workers’ social networks to disparities in their labour market performance. A worker with more friends, that is someone with more network links (higher degree), has better access to information. A worker whose friends are friends among each other (higher clustering coefficient) faces a higher level of peer pressure. Both access to information and peer pressure affect performance on the job. Our model allows us to rank different networks in terms of job performance. We then proceed to show that men’s and women’s networks differ. Men have a higher degree than women, but women have a higher clustering coefficient. These network disparities translate into differences in performance as well as wages, thereby offering a novel explanation for the gender wage gap. The third chapter offers a novel explanation for differences in the integration experience of immigrant communities in host societies through a model which emphasises the role of group leaders. We present a model of integration with distinct channels for social influence and skills acquisition and with a role for group leaders that benefit from their groups maintaining a distinct identity. In the long run, full integration is achieved only with flexible leaders, which themselves adapt over time. In the presence of rigid leaders that adopt an inflexible position, integration can remain incomplete, with integration levels higher for individuals of higher ability.