Gagnon, J. and Goyal, S.
Networks, Markets and Inequality
American Economic Review
Vol. 107(1) pp. 1-30 (2017)
Abstract: The interaction between community and markets remains a central theme in the social sciences. The empirical evidence is rich: in some instances, markets strengthen social ties, while in others they undermine them. The impact of markets on inequality and welfare also varies widely. This paper develops a model where individuals in a social network choose whether to participate in their network and whether to participate in the market. We show that individual behavior is defined by the q-core of the network and the key to understanding the conflicting evidence is whether the market and the network are complements or substitutes.
Author links: Sanjeev Goyal
Publisher's Link: http://dx.doi.org/10.1257/aer.20150635 
Open Access Full Text: https://www.repository.cam.ac.uk/handle/1810/257385