Segregation with Social Linkages Evaluating Schellings Model with Networked Individuals

Document pages: 38 pages

Abstract: This paper generalizes the original Schelling (1969, 1971a,b, 2006) model ofracial and residential segregation to a context of variable externalities dueto social linkages. In a setting in which individuals utility function is aconvex combination of a heuristic function a la Schelling, of the distance tofriends, and of the cost of moving, the prediction of the original model getsattenuated: the segregation equilibria are not the unique solutions. While thecost of distance has a monotonic pro-status-quo effect, equivalent to that ofmodels of migration and gravity models, if friends and neighbours are formedfollowing independent processes the location of friends in space generates anexternality that reinforces the initial configuration if the distance tofriends is minimal, and if the degree of each agent is high. The effect onsegregation equilibria crucially depends on the role played by networkexternalities.