From Neighborhoods to Nations: The Economics of Social Interactions

From Neighborhoods to Nations: The Economics of Social Interactions

From Neighborhoods to Nations: The Economics of Social Interactions

From Neighborhoods to Nations: The Economics of Social Interactions


Just as we learn from, influence, and are influenced by others, our social interactions drive economic growth in cities, regions, and nations--determining where households live, how children learn, and what cities and firms produce. From Neighborhoods to Nations synthesizes the recent economics of social interactions for anyone seeking to understand the contributions of this important area. Integrating theory and empirics, Yannis Ioannides explores theoretical and empirical tools that economists use to investigate social interactions, and he shows how a familiarity with these tools is essential for interpreting findings. The book makes work in the economics of social interactions accessible to other social scientists, including sociologists, political scientists, and urban planning and policy researchers.

Focusing on individual and household location decisions in the presence of interactions, Ioannides shows how research on cities and neighborhoods can explain communities' composition and spatial form, as well as changes in productivity, industrial specialization, urban expansion, and national growth. The author examines how researchers address the challenge of separating personal, social, and cultural forces from economic ones. Ioannides provides a toolkit for the next generation of inquiry, and he argues that quantifying the impact of social interactions in specific contexts is essential for grasping their scope and use in informing policy.

Revealing how empirical work on social interactions enriches our understanding of cities as engines of innovation and economic growth, From Neighborhoods to Nations carries ramifications throughout the social sciences and beyond.


Individuals share information; we self-select into social groups; most of us live and work in close proximity in cities and in firms, both important features of modern economic life. Economists, influenced by other social scientists and recognizing that disciplinary boundaries are sometimes arbitrary, have developed new theoretical models and empirical tools for understanding the social interactions that underlie interpersonal and community life.

This book offers a synthesis of research on the economics of social interactions, a body of knowledge made up of strands from several areas of economics. My goal is to provide a set of tools that can be used to structure empirical investigations and to interpret empirical findings in ways that make recent research in economics accessible as a tool to scholars in other social science disciplines. in other words, the book is designed to enrich our set of metaphors for understanding and modeling the fabric of communities, their neighborhoods, and their consequences for studying larger regional and national economies. Identifying and measuring the importance of social interactions is a challenging task because of the inherent difficulty in separating personal, social, and cultural forces from purely economic ones. Social interactions have important impacts on phenomena ranging from the diffusion of norms to how students learn from one another, and from causes of urban decay to explanations for economic growth.

The concept of social interactions has already shown its value in exploring many facets of interdependence between actors in the modern economy. in economics, social interactions are defined as direct agent-to-agent interactions that are not mediated by price. My overarching theme in this book is proximity in all of its dimensions and its impact on interactions among individuals and firms in society and in the economy. Chapter 1 introduces highlights of the significance of social interactions. Chapter 2 sets out the basics of the analytical language that I then use throughout the book to describe social interactions. the subsequent chapters use that analytical language. Chapter 3 examines location decisions of individuals and emphasizes the study of neighborhood effects in housing markets and their interaction with the role of prices in rationing admission to communities and neighborhoods in market economies. Chapter 4 looks at the impact of interactions on firms’ location decisions, focusing on the effects of proximity to other firms, the size of the total urban economy, the availability of a suitable labor force, and risk pooling. Chapter 5 builds on the foundations laid down in earlier chapters when economic agents interact in physical space. It examines how the interactions of individuals and firms in their vicinity and in broader communities help . . .

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