The role of relationships in labor markets for the popular arts and its impact on product quality

While utilizing social networks is common in labor markets and may benefit both firms and laborers, social networks are argued to be unusually important in the popular arts. Prior work in economics on the role of relationships in labor markets has generally focused on the benefits and not the costs. This paper takes a different approach by focusing on both costs and benefits, by examining a specific market where relationships are particularly important. This paper argues that in addition to reducing diversity and creating inherent inequalities, excessive reliance on networks can lead to higher agency costs and lower product quality.