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Networks Working Group - Julien Gagnon (Doctoral student, Economics, Cambridge)

When Nov 21, 2014
from 01:00 PM to 02:00 PM
Where Keynes Room
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Speaker: Julien Gagnon

Title: The Great Transformation Social Structure, Markets and Inequality

Authors: Julien Gagnon, Sanjeev Goyal


The empirical evidence on the interaction between traditional societies and modern markets is very mixed. In some cases, socially advantaged members take up market activity while in others marginalized groups embrace markets. Sometimes markets aggravate existing inequalities, but the converse pattern is also well documented. In this paper, we show that the key to understanding these differences is whether the communal and the market goods are (strategic) complements or substitutes. Social connectedness facilitates adoption of market good if the traditional activity are complements; the converse is true in case of substitutes. Inequality in a social structure is typically reinforced by the market in case the two goods are complements; the converse holds true if they are substitutes.