Social Network Structure and The Trade-Off Between Social Utility and Economic Performance

Abstract

Based on a novel computational multi-agent model, we identify the keymechanisms allowing the social network structure, summarized by four key socialcapital dimensions (network degree, centrality, bridging and bonding social capital), to affect individuals' social trust, willingness to cooperate, social utility and economic performance. We then trace how the individual-level outcomes aggregate up to thesociety level. Model setup draws from socio-economic theory and empirical findings based on our novel survey dataset. Results include aggregate-level comparative staticsand individual-level correlations. We find, inter alia, that societies that either arebetter connected, exhibit a lower frequency of local cliques, or have a smaller share offamily-based cliques, record relatively better economic performance. As long as familyties are sufficiently valuable, there is a trade-off between aggregate social utility andeconomic performance, and small world networks are then socially optimal.