nep-net New Economics Papers
on Network Economics
Issue of 2016‒11‒27
three papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Nominal Rigidity and the Idiosyncratic Origin of Aggregate Fluctuations By Raphael Schoenle; Michael Weber; Ernesto Pasten
  2. Specialization Dynamics, Convergence, and Idea Flows By Liuchun Deng
  3. Network Centrality in Labor Markets and Wage Dynamics By Marcelo Arbex; Ricardo Freguglia; Rafael Siano

  1. By: Raphael Schoenle (Brandeis University); Michael Weber (University of Chicago); Ernesto Pasten (Central Bank of Chile)
    Abstract: We study the aggregate propagation of idiosyncratic, sectoral shocks in a multi-sector new-Keynesian model with intermediate inputs featuring sectoral heterogeneity in price stickiness, sectoral GDP, and input-output linkages. Heterogeneity of price rigidity distorts the "granular" effect of the fat-failed distribution of sectors' size as well as the "network" effect of the centrality of some sectors in the production network. This distortion involves the strength of the aggregate volatility generated by sectoral shocks as well as the identity of the most important sectors. The granular and the network effects may in fact be completely irrelevant while the empirical distribution of price stickiness may generate by itself sizable aggregate volatility from sectoral shocks. We calibrate our model to 350 sectors using US data to quantify the strenght and interaction of "granular", "network" and "frictional" sources of the aggregate propagation of sectoral shocks.
    Date: 2016
  2. By: Liuchun Deng (John Hopkins University)
    Abstract: This paper studies the dynamics of international trade from the perspective of knowledge spillover. Building into an idea-flow model the industry dimension, I integrate four channels of knowledge spillover: each firm could learn from domestic producers as well as foreign sellers, and learning is both intra- and inter-industry. The theoretical framework yields the law of motion of industry-level productivity across countries, capturing strong interdependence of evolution of comparative advantage. I calibrate the model to a large sample of countries. My quantitative results capture important patterns in the data: strong convergence in comparative advantage and substantial mobility in specialization. Based on the law of motion, my decomposition exercise suggests international and inter-industry channels play a major role in knowledge spillover. Various measures are proposed to identify the “key player”, that is, the country or country-industry pair that contributes most to global productivity growth, in the knowledge diffusion network. The calibrated model also suggests dynamic gains from trade are at least one-third of static gains from trade.
    Keywords: international trade; specialization dynamics; convergence; industrial productivity; comparative advantage; knowledge spillover; economic growth
    JEL: F10 F43 O33 O47
    Date: 2016–11
  3. By: Marcelo Arbex (Department of Economics, University of Windsor); Ricardo Freguglia (Department of Economics, Federal University of Juiz de Fora); Rafael Siano (Department of Economics, Federal University of Juiz de Fora)
    Abstract: Network centrality measures how important an individual is for his network overall. We construct a novel measure of network centrality that takes into account a worker’s and coworkers’ tenure in the same occupation and firm. Using a linked employer-employee data source - the Brazilian Annual Social Information Report (RAIS) - we follow Brazilian workers in the formal labor market and we estimate the effects of a worker’s network centrality on their wages. For the period 2008-2013, we identify job networks and calculate a centrality index for workers in the city of São Paulo – Brazil. We present empirical evidence that job network relevance, measure by our centrality index, is important to explain wage differentials in the labor market. The wage returns are shown to be higher for those workers employed in larger companies, as well as for workers who have higher tenure. We also identify a positive relationship between a worker’s centrality index and his wage, which suggests that an increase of a worker’s relative relevance in his network is associated to higher wages. We believe that our study sheds light on the extent to which a worker’s importance in his job network can influence his wage over time.
    Keywords: Network centrality, Wage differentials, Peer effects, Labor markets
    JEL: J24 J31 D85
    Date: 2016–11

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