nep-net New Economics Papers
on Network Economics
Issue of 2017‒04‒23
three papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. How does risk flow in the credit default swap market? By D'Errico, Marco; Battiston, Stefano; Peltonen, Tuomas; Scheicher, Martin
  2. Social networks, geographic proximity, and firm performance in Viet Nam By Emma Howard
  3. Technological gatekeepers, regional inventor networks and inventive performance By Julie Le Gallo; Anne Plunket

  1. By: D'Errico, Marco; Battiston, Stefano; Peltonen, Tuomas; Scheicher, Martin
    Abstract: We develop a framework to analyse the Credit Default Swaps (CDS) market as a network of risk transfers among counterparties. From a theoretical perspective, we introduce the notion of flow-of-risk and provide sufficient conditions for a bow-tie network architecture to endogenously emerge as a result of intermediation. This architecture shows three distinct sets of counterparties: i) Ultimate Risk Sellers (URS), ii) Dealers (indirectly connected to each other), iii) Ultimate Risk Buyers (URB). We show that the probability of widespread distress due to counterparty risk is higher in a bow-tie architecture than in more fragmented network structures. Empirically, we analyse a unique global dataset of bilateral CDS exposures on major sovereign and financial reference entities in 2011 - 2014. We find the presence of a bow-tie network architecture consistently across both reference entities and time, and that the flow-of-risk originates from a large number of URSs (e.g. hedge funds) and ends up in a few leading URBs, most of which are non-banks (in particular asset managers). Finally, the analysis of the CDS portfolio composition of the URBs shows a high level of concentration: in particular, the top URBs often show large exposures to potentially correlated reference entities. JEL Classification: G10, G15
    Keywords: credit default swap, financial networks, flow-of-risk, network architecture, systemic risk
    Date: 2017–03
  2. By: Emma Howard
    Abstract: This paper uses panel data to assess the relative importance of social networks and geographic proximity to micro, small, and medium enterprises in Viet Nam. The results suggest that a larger social network, and hiring employees mainly through social networks, are both correlated with higher value added per worker. The number of government officials and civil servants in a firm’s network emerges as particularly important. When the quality of contacts is controlled for, firms with tighter social networks have, on average, higher value added per worker. The analysis of spatial networks reveals that firms with a lower percentage of customers and suppliers in the same district actually have higher value added per worker. The results suggest that for micro, small, and medium firms in Viet Nam, strong social networks are much more important than geographic proximity.
    Date: 2017
  3. By: Julie Le Gallo (AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement); Anne Plunket (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The paper investigates, in a regional context, the impact of gatekeepers on the quality of inventions at the patent team level based on a social network analysis. Given the lack of consensus in the literature, we explore two definitions of gatekeepers and distinguish their impact from external stars. Our results show that gatekeepers indeed influence the quality of the patents to which they participate. However, the quality of their patents is reduced if gatekeepers and their team members are located in the same region compared to multi-location teams and this holds for both definitions. External stars do not contribute to inventive quality even if they work within multi-location teams. Finally, inventor teams benefit from socially close gatekeepers located within their region, even if they have no gatekeepers within their team.
    Keywords: teams,global pipelines,inventor networks,technological gatekeepers,patent quality
    Date: 2016–11–22

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