What is the value of a social network? Prior work suggests two distinct mechanisms that have historically been difficult to differentiate: as a conduit of information, and as a source of social and economic support. This paper studies one of the most consequential economic decisions an individual can make — the decision to migrate — to understand how networks provide utility. We develop a model of network-based social capital, which we calibrate with an incredibly rich’digital trace’ dataset that make it possible to observe the complete social network structure, along with the migration decisions, of millions of individuals over several years. We establish a new set of stylized facts about the relationship between social networks and migration. Our results indicate that the average migrant derives more utility from ‘interconnected’ networks that provide social support than from ‘expansive’ networks that efficiently transmit information. We also find strong support for rivalry in information transmission, which suggests that the probability that two people share information is roughly inversely proportional to the (square root of the) size of their social networks.
Joshua Blumenstock, Guanghua Chi, Xu Tan