The Impact of Social Structure on Economic Outcomes

TLDR: In this article, the authors discuss how social structures and social networks can affect economic outcomes like hiring, price, productivity, and innovation, focusing on Sociologists have developed core principles about the interactions of social structure, information, ability to punish or reward, and trust.

Abstract: This chapter begins by reviewing some of the principles. Building on these, the chapter then discusses how social structures and social networks can affect economic outcomes like hiring, price, productivity, and innovation. It focuses on Sociologists have developed core principles about the interactions of social structure, information, ability to punish or reward, and trust that frequently recur in their analyses of political, economic, and other institutions. Thus, network structure can be partially endogenized in labor market analysis. However, there are also a range of alternatives, not commonly included in economic analysis, that work through social groups and create compliance in less intrusive ways. Many studies, comprehensively reviewed in Roger Myersons, show the powerful impact of social structure and networks on the extent and source of innovation and its diffusion. When people trade with others they know, the impact of knowing each other on the price varies with their relationship, the cost of shifting to different partners, and the market situation.