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An Economic Model of Friendship: Homophily, Minorities, and Segregation
Author(s) -
Currarini Sergio,
Jackson Matthew O.,
Pin Paolo
Publication year - 2009
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta7528
Subject(s) - homophily , friendship , per capita , economics , matching (statistics) , interpersonal ties , demographics , welfare , social psychology , demographic economics , econometrics , psychology , sociology , demography , mathematics , statistics , population , market economy
We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals have types and see 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 show how these empirical observations can be generated by biases in preferences and biases in meetings. We also illustrate some welfare implications of the model.