Discussion Paper Details

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Title: Network Capital

Author(s): Robert Akerlof and Richard Holden

Publication Date: January 2017

Keyword(s): increasing returns, inequality, investment and network capital

Programme Area(s): Financial Economics and Industrial Organization

Abstract: This paper explores the problem of assembling capital for projects. It can be difficult to assemble capital, when it is disaggregated, for a project that exhibits increasing returns. Small investors may be reluctant to participate, as they may question the ability of the project owner to raise the additional capital he requires. This suggests the possibility that agents with blocks of capital (capital that is already aggregated) might earn rents. Similarly, agents with "network capital" - that is, an ability to aggregate the capital of others - may earn rents. In this paper, we develop a theory of the rents attached to capital assembly, and discuss the implications for a range of issues from investment, to growth, to inequality.

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Bibliographic Reference

Akerlof, R and Holden, R. 2017. 'Network Capital'. London, Centre for Economic Policy Research.