An Economic Model of Friendship: Homophily, Minorities and Segregation

47 Pages Posted: 16 Oct 2007

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute; Canadian Institute for Advanced Research (CIFAR)

Paolo Pin

Dipartimento di Economia Politica

Date Written: October 2007

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.

Keywords: Networks, Homophily, Segregation, Friendships, Social Networks, Integration, Diversity, Minorities

JEL Classification: D85, A14, J15, J16

Suggested Citation

Currarini, Sergio and Jackson, Matthew O. and Pin, Paolo, An Economic Model of Friendship: Homophily, Minorities and Segregation (October 2007). University Ca' Foscari of Venice, Dept. of Economics Research Paper No. 20/07. Available at SSRN: https://ssrn.com/abstract=1021650 or http://dx.doi.org/10.2139/ssrn.1021650

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Matthew O. Jackson

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
1-650-723-3544 (Phone)

HOME PAGE: http://www.stanford.edu/~jacksonm

Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

Canadian Institute for Advanced Research (CIFAR) ( email )

180 Dundas Street West, Suite 1400
Toronto, Ontario
Canada

Paolo Pin

Dipartimento di Economia Politica ( email )

Piazza San Francesco 8
Siena, I53100
Italy

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