CeDEx workshop - Matthew Jackson (Stanford University)

(joint with Senior Academic Seminar Series)

Social Capital and Social Quilts: Network Patterns of Favor Exchange

Abstract

We examine the informal exchange of favors among the members of a society. We focus on situations where the interaction between any two individuals is insufficiently frequent to provide incentives to exchange favors over time, but where the social pressure of the possible loss of multiple relationships can sustain exchange. We characterize the network patterns of exchange that are robust in a sense that deleted relationships only result in a local loss of favor exchange. Such robustness necessitates “social quilts”: networks that are tree-like unions of completely connected subnetworks. More generally, with heterogeneity in agents’ costs and benefits from favors, robust networks are such that all links are “supported”: any pair of individuals exchanging favors must have a common friend. We show that favor exchange networks in 75 villages in rural India exhibit a frequency of this sort of support that is significantly higher than a standard ‘clustering’ measure. We also find some significant contrasts between support levels in favor networks and purely social networks.