nep-net New Economics Papers
on Network Economics
Issue of 2015‒11‒07
nine papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Compliance Behavior in Networks: Evidence from a Field Experiment By Drago, Francesco; Mengel, Friederike; Traxler, Christian
  2. Levelling the playing field: On the missing role of network externality in designing renewable energy technology deployment policies By Wei Jin; ZhongXiang Zhang
  3. India’s Air Traffic System: Network Topologies, Hierarchies and Evolution By Huber, Hans
  4. Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System By Charles W. Calomiris; Matthew Jaremski; Haelim Park; Gary Richardson
  5. Offshoring, Relationship-Specificity, and Domestic Production Networks By FURUSAWA Taiji; ITO Keiko; INUI Tomohiko; Heiwai TANG
  6. Systemic Loops and Liquidity Regulation By Aldasoro, Iñaki; Faia, Ester
  7. Spatial vs. Social Network Effects in Risk Sharing By Aida, Takeshi
  8. Friends or traders? Do social networks explain the use of market mechanisms by farmers in India By Songsermsawas, Tisorn; Baylis, Kathy; Chhatre, Ashwini; Michelson, Hope; Prasanna, Satya
  9. Centrality of regions in R&D networks: Conceptual clarifications and a new measure By Laurent Bergé; Iris Wanzenböck; Thomas Scherngell

  1. By: Drago, Francesco (University of Naples Federico II); Mengel, Friederike (University of Essex); Traxler, Christian (Hertie School of Governance)
    Abstract: This paper studies the spread of compliance behavior in neighborhood networks involving over 500,000 households in Austria. We exploit random variation from a field experiment which varied the content of mailings sent to potential evaders of TV license fees. Our data reveal a strong treatment spillover: 'untreated' households, who were not part of the experimental sample, are more likely to switch from evasion to compliance in response to the mailings received by their network neighbors. We analyze the spillover within a model of communication in networks based on DeGroot (1974). Consistent with the model, we find that (i) the spillover increases with the treated households' eigenvector centrality and that (ii) local concentration of equally treated households produces a lower spillover. These findings carry important implications for enforcement policies.
    Keywords: neighborhood networks, social learning, spillover, evasion, field experiment
    JEL: D8 H26 Z13
    Date: 2015–10
  2. By: Wei Jin (School of Public Policy, Zheijang University); ZhongXiang Zhang (College of Management and Economics, Tianjin University)
    Abstract: In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps.
    Keywords: renewable energy deployment; energy technology adoption; network externality; climate technology policies
    JEL: Q41 Q42 Q48 Q54 Q55 Q58 H23 O13
    Date: 2015–10
  3. By: Huber, Hans
    Abstract: The paper examines multi-dimensional patterns of network characteristics for scheduled Indian airlines between 2006 and 2014. The well-known skewed traffic distribution which concentrates traffic around relatively few hub airports serves as the starting point for decomposing the air traffic system (ATS) into its constituent route types. Operations of distinct airlines along these route classes allows for classifying carrier’s network features as an embedded part of the system. Discussion of the carriers’ role in the overall domestic ATS includes a spatial component. Inferences about development paths – past, present, future – of the Indian scheduled ATS can be made.
  4. By: Charles W. Calomiris; Matthew Jaremski; Haelim Park; Gary Richardson
    Abstract: Reducing systemic liquidity risk related to seasonal swings in loan demand was one reason for the founding of the Federal Reserve System. Existing evidence on the post-Federal Reserve increase in the seasonal volatility of aggregate lending and the decrease in seasonal interest rate swings suggests that it succeeded in that mission. Nevertheless, less than 8 percent of state-chartered banks joined the Federal Reserve in its first decade. Some have speculated that nonmembers could avoid higher costs of the Federal Reserve’s reserve requirements while still obtaining access indirectly to the Federal Reserve discount window through contacts with Federal Reserve members. We find that individual bank attributes related to the extent of banks’ ability to mitigate seasonal loan demand variation predict banks’ decisions to join the Federal Reserve. Consistent with the notion that banks could obtain indirect access to the discount window through interbank transfers, we find that a bank’s position within the interbank network (as a user or provider of liquidity) predicts the timing of its entry into the Federal Reserve System and the effect of Federal Reserve membership on its lending behavior. We also find that indirect access to the Federal Reserve was not as good as direct access. Federal Reserve member banks saw a greater increase in lending than nonmember banks.
    JEL: G21 G28 N22
    Date: 2015–10
  5. By: FURUSAWA Taiji; ITO Keiko; INUI Tomohiko; Heiwai TANG
    Abstract: An economy is an interlinked web of production units. This paper examines both theoretically and empirically how firms' offshoring decisions lead to reorganization of domestic production networks. We build a buyer-seller model that features supplier heterogeneity in efficiency and distance, as well as intermediate inputs that vary in the degree of specificity to the relationship with the buyer. The model predicts that the more productive buyers will source inputs from a larger range of domestic regions, especially for generic inputs. Inputs that are more relationship-specific are more likely to be insourced and less likely to be outsourced from distant regions or foreign countries. A drop in offshoring costs will induce the more productive final good producers to replace some of the less efficient domestic suppliers with foreign ones, and generic input suppliers are more likely to be dropped despite their higher productivity. The resulting reduction of input costs will induce them to expand the geographic scope of domestic outsourcing. Using unique and exhaustive data on the buyer-seller network in Japan, we find evidence supporting the main predictions of the model.
    Date: 2015–10
  6. By: Aldasoro, Iñaki; Faia, Ester
    Abstract: Risk contagion in the banking sector occurs through interconnections on the asset side or through liquidity spirals affecting the liability side. We build a network model of optimizing banks featuring contagion on both sides of banks’ balance sheets. To already existing asset side channels (liquidity hoarding, interbank exposures and fire sales of common assets) we add a critical liability side channel of contagion, namely bank runs triggered by information coordination akin to global games. The model is calibrated to the network of large European banks by a simulated method of moments approach and by using the real-world interbank matrix as a prior for the maximum entropy estimation of the model-based interbank matrix. We use the model to study the effects of phase-in increases of liquidity coverage ratios. Interestingly we find that the systemic risk profile of the system is not improved and might even deteriorate. Based on those insights we propose an alternative approach: differential (across banks) increases in coverage ratios based on systemic importance rankings help to mitigate the externalities and deliver a much more stable system.
    Keywords: bank runs; contagion; interconnections; liquidity scarcity; phase-ins
    JEL: C63 D85 G21 G28 L14
    Date: 2015–11
  7. By: Aida, Takeshi
    Abstract: Although substantial research has been conducted on informal consumption smoothing mechanisms within villages, or within social clusters such as family and friends, few studies have compared the effects of these spatial and social networks. Employing spatial panel econometric models, this study extends the conventional empirical test of the full risk-sharing hypothesis to incorporate spatial and social network effects, and quantifies the diffusion of income shocks in each network. Estimation results based on household survey data in Southern Sri Lanka show that consumption smoothing performs better in spatial networks than in social ones, because income shocks defuse more effectively among neighboring households. This study also shows the limitations of the conventional test when it is considered a special case of a spatial econometric model.
    Keywords: Agribusiness,
    Date: 2015
  8. By: Songsermsawas, Tisorn; Baylis, Kathy; Chhatre, Ashwini; Michelson, Hope; Prasanna, Satya
    Abstract: A farmer's long-term relationship with a trader can improve access to market information, but removes the farmers' option to sell to other traders in a specific year. Social networks could act either as substitutes to traders, helping disseminate market information and fostering economies of scale, or as complements, where farmers help build relationships between their trader and their peers. Using a household survey from India, we investigate whether and how social networks are associated with a farmer's choice to enter into a long-term relationship with a trader. We find that peers directly affect such choice. Further, we find that network characteristics and the household's position within that network influence the decision to have a long-term relationship. Specifically, the more central position of the household and the smaller number of connections with other households, the higher the likelihood a household has a long-term relationship with at least one trader. We rule out that these effects are driven by proximity.
    Keywords: Agribusiness, Agricultural and Food Policy, Agricultural Finance,
    Date: 2015
  9. By: Laurent Bergé; Iris Wanzenböck; Thomas Scherngell
    Abstract: This paper aims at introducing a novel measure of regional centrality in the context of R&D networks. We first demonstrate some substantial problems of SNA-based centrality measures to cope with regional R&D networks in a meaningful way. Then, we introduce a new measurement approach of regional network centrality based on the concept of inter-regional bridging paths (indirect connections at the regional level). We show that the formal definition of our regional bridging centrality measure can be expressed in terms of three simple components: the participation intensity of a region in inter-regional R&D collaborations, the relative outward orientation in terms of all established links and the diversification of R&D collaborations among partner regions. We illustrate the measure and its behaviour with respect to other conventional centrality measures by using the European co-patent network at the NUTS 2 level.
    Keywords: network centrality of regions, inter-regional R&D networks, inter-regional bridges, aggregated networks, co-patent network
    JEL: D85 L14 O31
    Date: 2015

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.