nep-net New Economics Papers
on Network Economics
Issue of 2017‒01‒01
five papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Econometric Analysis of Production Networks with Dominant Units By Pesaran, Hashem.; Fan Yang, Cynthia.
  2. The Economic Consequences of Social Network Structure By Matthew O. Jackson; Brian Rogers; Yves Zenou
  3. Cities and the Structure of Social Interactions: Evidence from Mobile Phone Data By Konstantin Büchel und Maximilian von Ehrlich
  4. Spatial competition with non-monotonic network effects and endogenous firm location decisions By Luca Savorelli; Jacob Seifert
  5. Social Media Use and Children’s Wellbeing By Emily McDool; Phillip Powell; Jennifer Roberts; Karl Taylor

  1. By: Pesaran, Hashem.; Fan Yang, Cynthia.
    Abstract: This paper builds on the work of Acemoglu et al. (2012) and considers a production network with unobserved common technological factor and establishes general conditions under which the network structure contributes to aggregate fluctuations. It introduces the notions of strongly and weakly dominant units, and shows that at most a finite number of units in the network can be strongly dominant, while the number of weakly dominant units can rise with N (the cross section dimension). This paper further establishes the equivalence between the highest degree of dominance in a network and the inverse of the shape parameter of the power law. A new extremum estimator for the degree of pervasiveness of individual units in the network is proposed, and is shown to be robust to the choice of the underlying distribution. Using Monte Carlo techniques, the proposed estimator is shown to have satisfactory small sample properties. Empirical applications to US input-output tables suggest the presence of production sectors with a high degree of pervasiveness, but their effects are not sufficiently pervasive to be considered as strongly dominant.
    Keywords: aggregate ?uctuations, strongly and weakly dominant units, spatial models, outdegrees, degree of pervasiveness, power law, input-output tables, US economy
    JEL: C12 C13 C23 C67 E32
    Date: 2016–12–16
  2. By: Matthew O. Jackson; Brian Rogers; Yves Zenou
    Abstract: We survey the literature on the economic consequences of the structure of social networks. We develop a taxonomy of ‘macro’ and ‘micro’ characteristics of social inter-action networks and discuss both the theoretical and empirical findings concerning the role of those characteristics in determining learning, diffusion, decisions, and resulting behaviors. We also discuss the challenges of accounting for the endogeneity of networks in assessing the relationship between the patterns of interactions and behaviors.
    Keywords: Social networks, social economics, homophily, diffusion, social learning, contagion, centrality measures, endogeneity, network formation.
    JEL: D85 C72 L14 Z13
    Date: 2016–11
  3. By: Konstantin Büchel und Maximilian von Ehrlich
    Abstract: Social interactions are considered pivotal to urban agglomeration forces. This study employs a unique dataset on mobile phone calls to examine how social interactions differ across cities and peripheral areas. We first show that geographical distance is highly detrimental to interpersonal exchange. We then reveal that individuals residing in high-density locations do not benefit from larger social networks, but from a more efficient structure in terms of higher matching quality and lower clustering. These results are derived from two complementary approaches: Based on a link Formation model, we examine how geographical distance, network overlap, and sociodemographic (dis)similarities impact the likelihood that two agents interact. We further decompose the effects from individual, location, and time specific determinants on micro-level network measures by exploiting information on mobile phone users who change their place of residence.
    Keywords: Social Interactions; Agglomeration Externalities; Network Analysis; Sorting
    JEL: R1 R23 Z13 D85
    Date: 2016–12
  4. By: Luca Savorelli (School of Economics and Finance, University of St Andrews); Jacob Seifert (University of Manchester)
    Abstract: We consider a spatial duopoly with non-monotonic network effects and extend the literature by endogenizing firms' location decisions. We show that the existence of equilibrium is ruled out due to displacement incentives at the location stage whenever network effects are sufficiently strong. Furthermore, unlike in exogenous location models, neither vertical product differentiation nor a monopoly outcome can arise endogenously in equilibrium. Relative to monotonic network effect models, our framework provides an additional rationale for a duopolistic market structure to be welfare-preferred to monopoly: for large population sizes, splitting demand between two firms can reduce the disutility from crowding.
    Keywords: product differentiation, network effects, welfare.
    JEL: L14 D62
    Date: 2016–12–23
  5. By: Emily McDool (Department of Economics, University of Sheffield); Phillip Powell (Department of Economics, University of Sheffield); Jennifer Roberts (Department of Economics, University of Sheffield); Karl Taylor (Department of Economics, University of Sheffield)
    Abstract: Childhood circumstances and behaviours have been shown to have important persistent effects in later life. One aspect of childhood that has changed dramatically in the past decade, and is causing concern among policy makers and other bodies responsible for safeguarding children, is the advent of social media, or online social networking. This research explores the effect of children’s digital social networking on their subjective wellbeing. We use a large representative sample of 10-15 year olds over the period 2010 to 2014 from the UK Household Longitudinal Study, and estimate the effect of time spent chatting on social websites on a number of outcomes which reflect how these children feel about different aspects of their life, specifically: school work; appearance; family; friends; school attended; and life as a whole. We deal with the potential endogeneity of social networking via an instrumental variables approach using information on broadband speeds and mobile phone signal strength published by Ofcom. Our results suggest that spending more time on social networks reduces the satisfaction that children feel with all aspects of their lives, except for their friendships; and that girls suffer more adverse effects than boys. As well as addressing policy makers’ concerns about the effects of digital technology on children, this work also contributes to wider debates about the socioeconomic consequences of the internet and digital technologies more generally, a debate which to date has largely been based on evidence from outside of the UK.
    Keywords: digital society, social media, wellbeing, children
    JEL: D60 I31 J13
    Date: 2016–12

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