Job Market Paper
This paper presents a model of how organizations develop complex products. Decentralizing into autonomous units increases the potential value of production but raises the risk of miscoordination. To facilitate communication, the organization can form costly and imperfectly reliable bilateral connections between units. It creates redundancy in these connections at minimal cost to make the process robust against some degree of miscoordination. Organizations either centralize processes or decentralize them substantially to exploit increasing returns to decentralization. Small reductions in connection costs can trigger substantial decentralization and, paradoxically, undermine robustness. Larger cost reductions enhance robustness and increase decentralization.
Working Papers
Homophily and Specialization in Networks, with Luca Paolo Merlino [Supplemental Appendix]
Revise & Resubmit at the Economic Journal
In this paper, we study a game where players contribute to two local public goods for which they have different tastes and sponsor costly links to enjoy the provision of others. We characterize the game’s equilibria and show that linking costs influence who contributes vs. who free rides. Lower linking costs can reduce welfare and increase polarization. When the available budget is small, a social planner should subsidize players who are already providing significant amounts of public goods. With a larger budget, subsidies should target a single player who provides the public good bundle that is most beneficial to society.
Mobile but Miserable, with Matt Elliott, Christian Ghiglino and Alastair Langtry
In high social mobility societies, individuals’ economic outcomes depend heavily on their own ability and less on their parental background. This is overwhelmingly viewed as a positive. Yet within the UK, higher social mobility is not associated with higher well-being, complicating the view that higher social mobility is always better. We present a model to explore how social mobility affects welfare when individuals compare themselves to others. We show that the welfare effects of higher social mobility depend critically on the pattern of these comparisons – that is, on network structure. Specifically, for high mobility to improve welfare, we need to first integrate communities so that people’s friendships – not just their economic outcomes – can be influenced more by their ability and less by their parental background. In fact, pursuing policies that increase social mobility while ignoring the network could be worse than doing nothing at all.
Revealing Information - or not - in a Social Network of Traders, with Paolo Pin and Fernando Vega-Redondo
We propose a simple micro-founded model of trading with ex-ante asymmetric information similar to one proposed by Kyle (1985) in which the equilibrium price is fully revealing under rational expectations. We analyze under which conditions a privately informed trader may want to share her information with other traders for free. Despite the strictly competitive setup and conventional wisdom, we show that there is a unique separating equilibrium in which the informed trader reveals some signals and conceals others. A consequence of this is that the price need not be fully revealing of the aggregate information in the market (even if traders are risk neutral), which in turn has welfare implications on the distribution of the social surplus at equilibrium. We establish these results for a context where the pattern of communication among traders is restricted by a given social network, studying as well what network arises when links are established endogenously.
Ideology and Tolerance in Networks
Agents with heterogeneous ideologies select an interval of tolerable types and invest effort to form connections within this range. The resulting weighted network classifies agents as allies, opponents, and defines the strengths of alliances. Agents outside each other’s tolerance intervals are opponents, generating benefits that increase with (i) a player's relative strength and (ii) network effects, which reflect the number of shared allies disputing the same opponent. When network effects are strong, players form cliques, whereas weaker network effects lead to opponents sharing mutual allies. Effective policy interventions to reduce polarization depend critically on the initial structure of the network.
Socially Disadvantaged Ethnic Groups and Distributive Politics, with Vangjel Bita and Aldo Elizalde
This paper examines how co-ethnics sustain favouritism. We develop a theoretical framework of favour exchange, which predicts that groups with relatively higher income are better positioned to sustain favouritism by using their economic advantages to enforce cooperation. For example, politicians reward loyal voters with access to resources or punish defection by excluding voters from future benefits. Using individual-ethnic level data on public goods access before and after Evo Morales’s presidency (2005–2012)—Bolivia’s first Indigenous president—and implementing a difference-in-differences strategy that exploits variation in ethnicity, time, and political support, we document two key findings. First, Morales’s co-ethnics (Aymaras) experienced greater access to public goods in provinces where his party was politically dominant. Second, consistent with the proposed mechanism, such favouritism was primarily driven by Aymaras with relatively higher income, who saw disproportionate gains in access to public goods. Our results highlight how economic disparities amplify the benefits of political alignment, reinforcing existing economic hierarchies within favoured groups and perpetuating inequality even when marginalized groups gain political representation.