It is by now generally agreed that social networks are important institutions that determine economic outcomes in many settings, especially in developing countries. The literature on networks in economics takes the view that while these institutions may be resilient in the face of economic change, they will decay as markets expand and grow more efficient. This research argues that while traditional networks might restrict mobility, new networks are also constantly forming in dynamic economies. This research studies how networks form and encourage mobility in dynamic economies, using three new and unique data sets that have been collected in India and the United States. The first application is based on the changing structure of the Indian diamond industry. Using new firm-level data, this research will examine social networks that permitted low caste Kathiawaris, who hitherto had no experience in the industry to compete successfully with the established communities, and to understand the dynamic interaction between the underlying community networks and market structure in this industry. The second application is to US biomedical R&D labs, where it is observed that labs headed by foreign investigators have a disproportionate number of lab-staff from the heads' origin countries. The argument is that heads exploit their home connections to solve an information problem and pick the most able researchers, instead of simply showing a parochial preference for workers from their own countries. The third project looks at the link between social networks and local democracy in India, using data from a new survey in rural India to explore the economics of identity politics in investigating the role played by caste networks in mobilizing resources for their members through the democratic political process.
The scientific merit of this research project is a better understand how social networks form, and adapt to changing circumstances so as to enhance mobility in several dynamic economic and social settings and, in the process, shape and be shaped by changes in the market. For example, the diamond project sheds light on the role social network plays in the development of entrepreneurship in globalizing economies. The results of this research will provide guidance for several social policies, such as the development of entrepreneurship, trade, R&D, and democratization. These are key lessons for institutional development in low income countries in particular and the world economy generally in a globalizing world. Finally, the unique data sets collected for this research project will be useful to other researchers.
