Knowledge that Transforms

Women continue to be underrepresented in corporate leadership positions. This article studies the role of social connections in women’s career advancement. We investigate whether access to a larger share of female peers in business school affects the gender gap in senior managerial positions. Merging administrative data from a top 10 U.S. business school with public LinkedIn profiles, we first document that female MBAs are 24% less likely than male MBAs to enter senior management within 15 years of graduation. Next we use the exogenous assignment of students into sections to show that a larger proportion of female MBA section peers increases the likelihood of entering senior management for women but not for men. This effect is driven by female-friendly firms, such as those with more generous maternity leave policies and greater work-schedule flexibility. A larger proportion of female MBA peers induces women to transition to these firms where they attain senior management roles. A survey of female MBA alumnae reveals three key mechanisms: (i) information sharing, especially related to gender-specific advice, (ii) higher ambitions and self-confidence, and (iii) increasing support from male MBA peers. These findings highlight the role of social connections in reducing the gender gap in senior management positions.

We introduce markup equilibrium—an extension of Walrasian equilibrium in which consumers pay a fixed percentage markup over producer prices. In quasilinear markets, markup equilibria exist despite nonconvexities. They are resource-feasible and envy-free, incur no budget deficit, and require little more communication and computation than ordinary Walrasian equilibrium. The associated markup mechanism is asymptotically incentive-compatible. We also introduce a Bound-Form First Welfare Theorem, which states that for any feasible allocation, the welfare loss compared to the first-best is bounded, using any price vector, by the sum of the resulting (i) budget surplus and (ii) rationing losses suffered by the participants. Using producer prices, this bound implies that any markup equilibrium with a small markup and few unallocated goods is nearly efficient.

How do bank networks facilitate information flows that shape market outcomes? Using international banks’ advisory activities in corporate takeovers as their source of private information, we show in supervisory data that banks with closer ties to the target, but not the acquirer, advisor trade profitably in the target’s stock prior to the deal announcement. This trading behavior is associated with a higher premium paid without compromising deal success. As connected banks’ incentives are aligned only with target shareholders’ interests, which are represented by the target advisor, our evidence suggests that economic incentives determine which banks share information and with whom.