Social Networks and Intergenerational Mobility, joint with Sumit Joshi, Ahmed Saber Mahmud and Hector Tzavellas

Abstract: Various factors have been linked to the intergenerational persistence of inequality such as wealth, inheritance, education, race and others. Little is known, however, of the role of social interaction and its manifestation through societal institutions in generating economic mobility. We employ a dynastic model of network formation which isolates the impact of network interactions on economic mobility. We highlight the role of institutions in amplifying or suppressing this network margin to economic mobility, demonstrating that upwards mobility is strongest when society does not impose any explicit constraint on the network formation process and allows individuals to form any relationship they find profitable. We characterize the level of mobility under varying strengths on the intergenerational persistence of links. Institutions such as Nepotism are shown to generate the weakest levels of mobility.