Inequality's Economic and Social Roots: The Role of Social Networks and Homophily

45 Pages Posted: 22 Mar 2021 Last revised: 25 Oct 2021

See all articles by Matthew O. Jackson

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute

Date Written: March 20, 2021

Abstract

I discuss economic and social sources of inequality and elaborate on the role of social networks in inequality, economic immobility, and economic inefficiencies. The lens of social networks clarifies how the entanglement of people's information, opportunities, and behaviors with those of their peers and communities leads to persistent differences in outcomes across groups in education, employment, health, income and wealth. The key role of homophily in dividing groups within the network is highlighted. A network perspective's policy implications differ substantially from a strictly economic perspective. I discuss the importance of ``policy cocktails'' that include aspects that are aimed at both the economic and social forces driving inequality.

Keywords: Inequality, Mobility, Immobility, Economic Mobility, Social Networks, Homophily, Social Capital, Job Referrals, Poverty Traps, Job Contacts, Discrimination, Social Norms, Networks, Complementarities, Affirmative Action, Peer Effects, Redistribution

JEL Classification: D85, D13, D63, D78, L14, O12, Z13

Suggested Citation

Jackson, Matthew O., Inequality's Economic and Social Roots: The Role of Social Networks and Homophily (March 20, 2021). Available at SSRN: https://ssrn.com/abstract=3795626 or http://dx.doi.org/10.2139/ssrn.3795626

Matthew O. Jackson (Contact Author)

Stanford University - Department of Economics ( email )

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

Santa Fe Institute

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United States

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