Network Structure and Performance

Abstract

We develop a theory that links individuals’ network structure to their productivity and earnings. While a higher degree leads to better access to information, more clustering leads to higher peer pressure. Both information and peer pressure affect effort in a model of team production, with each being beneficial in a different environment. We find that information is particularly valuable under high uncertainty, whereas peer pressure is more valuable in the opposite case. We apply our theory to gender disparities in performance. We document the novel fact that men establish more connections (a higher degree) whereas women possess denser networks (a higher clustering coefficient). We therefore expect men to outperform women in jobs that are characterised by high uncertainty in project outcomes and earnings. We provide suggestive evidence that supports our predictions.