Working Paper: CEPR ID: DP10321
Authors: Facundo Albornoz; Antonio Cabrales; Esther Hauk
Abstract: We study a model that integrates productive and socialization efforts with network choice and parental investments. We characterize the unique symmetric equilibrium of this game. We first show that individuals underinvest in productive and social effort, but that solving only the investment problem can exacerbate the misallocations due to network choice, to the point that it may generate an even lower social welfare if one of the networks is sufficiently disadvantaged. We also study the interaction of parental investment with network choice. We relate these equilibrium results with characteristics that we find in the data on economic co-authorship and field transmission between advisors and advisees.
Keywords: Cultural identity; Immigrant sorting; Network formation; Parental involvement; Peer effects
JEL Codes: I20; I28; J15; J24; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Policy interventions targeting socialization and production (P36) | harm social welfare (I38) |
| Parental investment + Network choice (D85) | children's decisions (J13) |
| Parental investment (J13) | children's network choice (D85) |
| children's network choice (D85) | productive efforts (J24) |
| Parental investment (J13) | productive efforts (J24) |
| Network choice (D85) | socialization (Z13) |
| Network choice (D85) | productive efforts (J24) |
| Network choice (D85) | investment decisions (G11) |
| Network choice based on productivity (D85) | excessive integration into mainstream labor market (J79) |