Endogenous Identity in a Social Network

Abstract: Interaction with individuals from other socioeconomic classes has been shown to be a main driver for social mobility. We employ tools of social identity theory and network analysis to show how exposure to individuals of different social identities can lead to interactions with them, and an adoption of their identity, creating social mobility. We find that even if all individuals have the same ability, they may endogenously choose different identities, leading to different classes and actions. In particular, we derive a sufficient condition for such an equilibrium to exist, which equates to a novel measure of cohesion. Furthermore, we show that the most socially mobile individuals (changing their identity) are those who either have few connections or a more heterogeneous mix of identities in their connections. Finally, we show that upward social mobility increases action levels in society, but not necessarily welfare.