DP13611 Migration and the Value of Social Networks

Author(s): Joshua Blumenstock, Guanghua Chi, Xu Tan
Publication Date: March 2019
Keyword(s): Big Data, Development, migration, networks, social capital, Social Networks
JEL(s): C55, D85, O12, O15, R23, Z13
Programme Areas: Labour Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13611

What is the value of a social network? Prior work suggests two distinct mechanisms that have historically been difficult to differentiate: as a conduit of information, and as a source of social and economic support. We use a rich 'digital trace' dataset to link the migration decisions of millions of individuals to the topological structure of their social networks. We find that migrants systematically prefer 'interconnected' networks (where friends have common friends) to 'expansive' networks (where friends are well connected). A micro-founded model of network-based social capital helps explain this preference: migrants derive more utility from networks that are structured to facilitate social support than from networks that efficiently transmit information.