Birds of a Feather Flock Together and Lead to Inequality

, by Pedro Adami Oliboni
IGIER Visiting Student Pedro Adami Oliboni reports on the seminar by Matthew Jackson on the effects of homophily on social networks

People tend to associate with those who are similar to themselves. This simple phenomenon is known as homophily and it has serious implications for complex problems such as inequality. The consequences of homophily were the focus of the IGIER seminar of March 8th presented by Matthew Jackson (Stanford University), a pioneer in the field of social and economic networks.

The theory of social and economic networks models people as nodes in a network in which links represent relationships (e.g. friendships and trade partnerships). Our social networks have fundamental roles such as giving us opportunities, information, and culture. People very often find job opportunities through their friendships and acquaintances. Indeed, Professor Jackson highlighted that, at all skill levels, around 50 to 70% of jobs are found through referrals. Within our networks we also obtain information crucial to economic decisions such as investing and education. The norms and culture we adopt too depend on our network as many factors push us to behave similarly to those around us.

Homophily divides our social networks into relatively isolated groups. For example, Prof. Jackson's research on friendships reveals a significant tendency of white and black students to connect with people from their same self-reported race. In a dataset of high schools, while only 38% of students were black, 85% of friendships of black students were with other blacks – with a similar pattern of homophily holding for whites. In the seminar, Prof. Jackson noted that homophily can be the result of many different factors, only some of which have been identified. One such factor is how we are often more exposed to similar people: think of how children in school are grouped by age. Then, given how we tend to form relations with those we see frequently, this exposure pattern will result in homophily. Additionally, it is easier for people to relate to those who share their background. For an extreme case, people who don't speak the same language have a much harder time communicating.

The effects of homophily on social networks have far-reaching consequences. In particular, homophily leads different social groups to have unequal opportunities, adopt different norms and behaviors, and access unequal information. With the help of a simple model, Prof. Jackson illustrated how the combination of homophily and the importance of referrals escalates an initial disparity in employment between two groups to a persistent inequality in access to jobs. This helps explain the famous Great Gatsby curve, which reflects the correlation of inequality and immobility across countries. Moreover, divisions in the network can cause people from different groups to persistently adopt different norms and behaviors. Prof. Jackson outlined a stylized model where people select an action - for instance dropping out of school or not - based on what most of their friends do. With homophily, differences in drop-out rates between groups may be amplified and persist through time. Finally, homophily affects what information we have access to. Consider how the experience of a person (e.g. on whether university is worth the cost) with similar background is in general more informative to you. But if you only observe the outcomes of people similar to you, this will limit the scope of information you are able to access. Thus, depending on the context homophily can be beneficial or harmful: the less informative people with different backgrounds are to you, the more you gain from homophily; but homophily will hurt you to the extent that people in your group tend to not explore a broad range of experiences.

The persistent and context-dependent consequences of homophily have various policy implications. For one, affirmative action has important flow-through effects. Not only will disadvantaged people be helped directly, but they can also become a channel for people from their group to access previously unavailable opportunities – thus breaking the cycle of inequality and immobility. Furthermore, the optimal policy will depend sensitively on the network situation, as we saw that homophily helps or hurts depending on context.

Prof. Jackson elaborated on the evolution and context-dependency of homophily by discussing results from a study which tracked friendships and academic outcomes of Caltech students. Concerning evolution, homophily based on gender was found to get stronger with time while homophily based on ethnicity did not. Concerning consequences, study partners of different ethnicities are associated with higher GPA gains, but the story is different for gender: women seem to gain much more from studying with other women than with men.

In this seminar, Prof. Jackson illustrated how homophily shapes networks and therefore our lives. He highlighted that in order to understand how to address crucial economic and social issues we must pay attention to homophily and we must carefully consider how homophily shapes networks over time and has varying effects depending on context.

Sergio Currarini, Matthew O. Jackson, and Paolo Pin. "An economic model of friendship: Homophily, minorities, and segregation." Econometrica 77.4 (2009): 1003-1045.

Matthew O Jackson. "Inequality's Economic and Social Roots: The Role of Social Networks and Homophily." Available at SSRN 3795626 (2021).