nep-net New Economics Papers
on Network Economics
Issue of 2015‒07‒18
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Networks and the Macroeconomy: An Empirical Exploration By Daron Acemoglu; Ufuk Akcigit; William Kerr
  2. Networked Politics: Political Cycles and Instability under Social Influences By Diffo Lambo, Lawrence; Pongou, Roland; Tchantcho, Bertrand; Wambo, Pierre
  3. Contagion effects in the world network of economic activities By V. Kandiah; H. Escaith; D. L. Shepelyansky
  4. Networks in Manuel Castells’ theory of the network society By Anttiroiko, Ari-Veikko
  5. Social network effects on mobile money adoption in Uganda By Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas
  6. Understanding participation in modern supply chains under a social network perspective – evidence from blackberry farmers in the Ecuadorian Andes By Herforth, Nico; Theuvsen, Ludwig; Vásquez, Wilson; Wollni, Meike
  7. Distance-based accessibility indices By Csató, László

  1. By: Daron Acemoglu; Ufuk Akcigit; William Kerr
    Abstract: The propagation of macroeconomic shocks through input-output and geographic networks can be a powerful driver of macroeconomic fluctuations. We first exposit that in the presence of Cobb-Douglas production functions and consumer preferences, there is a specific pattern of economic transmission whereby demand-side shocks propagate upstream (to input-supplying industries) and supply-side shocks propagate downstream (to customer industries) and that there is a tight relationship between the direct impact of a shock and the magnitudes of the downstream and the upstream indirect effects. We then investigate the short-run propagation of four different types of industry-level shocks: two demand-side ones (the exogenous component of the variation in industry imports from China and changes in federal spending) and two supply-side ones (TFP shocks and variation in knowledge/ideas coming from foreign patenting). In each case, we find substantial propagation of these shocks through the input-output network, with a pattern broadly consistent with theory. Quantitatively, the network-based propagation is larger than the direct effects of the shocks. We also show quantitatively large effects from the geographic network, capturing the fact that the local propagation of a shock to an industry will fall more heavily on other industries that tend to collocate with it across local markets. Our results suggest that the transmission of various different types of shocks through economic networks and industry interlinkages could have first-order implications for the macroeconomy.
    JEL: E32
    Date: 2015–07
  2. By: Diffo Lambo, Lawrence; Pongou, Roland; Tchantcho, Bertrand; Wambo, Pierre
    Abstract: Media, opinion leaders, co-ethnics, family members, and friends influence our political decisions. The ways in which these influences affect political cycles and (in)stability has been understudied. We propose a model of a networked political economy, where agents' choices are partly determined by the opinions of the individuals with whom they are connected in a fixed influence network. The model features two types of individuals: ideological individuals who never change their views and who seek to influence the rest of the society; and non-ideological individuals who have no political allegiance and do not influence anybody, but who can be influenced by ideological individuals with whom they are connected. We show that influence networks increase political turnout and cause non-ideological individuals who are subject to antagonistic influences to keep changing their political views. This in turn increases political cycles and instability in two ways: (1) by reducing the number of stable and popular political leaders; and (2) by worsening the tradeoff between political competition and the existence of a stable leader. We uncover a necessary and sufficient condition that characterizes all of the political technologies and network structures that guarantee political stability. This condition introduces a preference-blind stability index, which maps each pair of a constitution and an influence network into the maximum number of competing political leaders that a society can afford while remaining stable regardless of the extent of preference heterogeneity in its population. Our findings have testable implications for different societies. They shed light on the network origins of political cycles in two-party systems. They also imply that individualist societies are more politically stable than collectivist societies and societies organized around ethnic groups or characterized by a high level of homophilous behavior and influences. For ethnic democracies, we quantify the exact tradeoff between political competition and stability, and show that ethnic fragmentation increases stability. This latter finding further provides a rationale for using the "divide and rule" strategy to maintain political power. Finally, we find that cliques and multi-layer cliques maximize the competition-stability tradeoff, whereas star networks, lines and rings minimize it.
    Keywords: Political cycles, instability, influence networks, homophily, ethnic democracy, competition-stability tradeoff.
    JEL: C0 C7 D7 D8 D85 H0 O1
    Date: 2015–06–01
  3. By: V. Kandiah; H. Escaith; D. L. Shepelyansky
    Abstract: Using the new data from the OECD-WTO world network of economic activities we construct the Google matrix $G$ of this directed network and perform its detailed analysis. The network contains 58 countries and 37 activity sectors for years 1995, 2000, 2005, 2008, 2009. The construction of $G$, based on Markov chain transitions, treats all countries on equal democratic grounds while the contribution of activity sectors is proportional to their exchange monetary volume. The Google matrix analysis allows to obtain reliable ranking of countries and activity sectors and to determine the sensitivity of CheiRank-PageRank commercial balance of countries in respect to price variations and labor cost in various countries. We demonstrate that the developed approach takes into account multiplicity of network links with economy interactions between countries and activity sectors thus being more efficient compared to the usual export-import analysis. Our results highlight the striking increase of the influence of German economic activity on other countries during the period 1995 to 2009 while the influence of Eurozone decreases during the same period. We compare our results with the similar analysis of the world trade network from the UN COMTRADE database. We argue that the knowledge of network structure allows to analyze the effects of economic influence and contagion propagation over the world economy.
    Date: 2015–07
  4. By: Anttiroiko, Ari-Veikko
    Abstract: This paper discusses the conceptualization of network in Manuel Castells’ theory of network society. Castells’ early academic works were built on the structural analysis of capitalism and social movements in response to the contradictions of capitalist society, without any explicit connection to network analysis. Networks gradually appeared in Castells’ works in the late 1980s, when he became interested in the configuration of the relationships between technology, economy, and society. The culmination of this phase was his opus magnum, The Information Age trilogy, which introduced network as a key concept of his macro theory, even though he remained laconic about the concept itself. This is paradoxical, for Castells became possibly the most prominent figure globally in adopting network terminology in macro sociological theory, but at the same time made hardly any empirical, theoretical or methodological contribution to social network analysis or network theory in general. This implies that ‘network’ in Castells’ social theory is not an analytical concept but rather a powerful metaphor that served to capture his idea of the new social morphology of late capitalism.
    Keywords: Manuel Castells, network, network society, The Information Age, social theory, political economy, capitalist society, late capitalism, informational city, social morphology
    JEL: A13 A14 B31 B51 B52 H11 H7 I0 J6 L16 L23 L5 O1 O2 O3 O33 P1 P16
    Date: 2015–07–15
  5. By: Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas
    Abstract: Social networks play a vital role in generating social learning and information exchange that can drive the diffusion of new financial innovations. This is articularly relevant for developing countries where education, extension and financial information services are underprovided. The recent introduction of mobile money in Africa represents a case where imperfect financial markets, weak extension services and information asymmetries limit the ability of rural households to make informed decisions to take advantage of mobile money innovation. This article identifies the role of social networks in the adoption of mobile money in Uganda. Using data from a survey of 477 rural households, a probit model is estimated controlling for household characteristics, correlated effects, and other possible information sources. Results suggest that learning within social networks helps disseminate information about mobile money and has enhanced its adoption. Compared to poor households, non-poor households rely more on social networks for information about mobile money. Mobile money adoption is likely to be enhanced if promotion programs reach more social networks.
    Keywords: social networks, mobile money, adoption, Uganda, International Development, Research and Development/Tech Change/Emerging Technologies, D14, D83, O33, Q12,
    Date: 2015–02
  6. By: Herforth, Nico; Theuvsen, Ludwig; Vásquez, Wilson; Wollni, Meike
    Abstract: In this paper, we use semi-structured interviews with firm representatives and original survey data to study the factors influencing farmers’ participation in modern supply chains in the Ecuadorian blackberry sector. Previous research has emphasized the important role of farm size and non-farm assets enabling participation in these chains. Going beyond this scope of analysis, we argue that farmers’ social networks can be an important avenue to facilitate inclusion. Using different probit model specifications, we find that individual farmers’ social networks are important determinants for participation in modern supply chains in an environment characterized by a homogenous farm sector. Further research is needed to explore the specific pathways through which social networks exert their influence.
    Keywords: supply chains, social networks, blackberries, food markets, transaction costs, Ecuador, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, D23, D80, Q13, Z13,
    Date: 2015–02
  7. By: Csató, László
    Abstract: The paper attempts to develop a suitable accessibility index for networks where each link has a value such that a smaller number is preferred like distance, cost, or travel time. A measure called distance sum is characterized by three independent properties: anonymity, an appropriately chosen independence axiom, and dominance preservation, which requires that a node not far to any other is at least as accessible. We argue for the need of eliminating the independence property in certain applications. Therefore generalized distance sum, a family of accessibility indices, will be suggested. It is linear, considers the accessibility of vertices besides their distances and depends on a parameter in order to control its deviation from distance sum. Generalized distance sum is anonymous and satisfies dominance preservation if its parameter meets a sufficient condition. Two detailed examples demonstrate its ability to reflect the vulnerability of accessibility to link disruptions.
    Keywords: networks, geography, accessibility, distance sum, axiomatic approach
    JEL: D85 Z13
    Date: 2015–06–30

This nep-net issue is ©2015 by Yi-Nung Yang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.