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Prof. Antonio Cabrales

University College London, United Kingdom

Authors: Facundo Albornoz, Antonio Cabrales, and Esther Haul

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. Individuals underinvest in productive and social effort. However, solving only the investment problem can exacerbate the misallocations due to network choice, to the point that in the presence of congestion effects the intervention may generate an even lower social welfare than no intervention at all. We also study the interaction of parental investment with network choice. In many scenarios, intergenerational transmission of abilities leads to a tendency towards to conformism, which aggravates potential problems of network overpopulation. We relate our equilibrium results with the existing evidence on parental occupational transmission.

JEL-Classification: D85, I20, I28, J15, J24. J61, J62.

Key-words: peer effects, network formation, parental involvement, intergenerational mobility, cultural identity, immigrant sorting.

Full Text:  “Targeted Socialization and Production”