nep-net New Economics Papers
on Network Economics
Issue of 2017‒05‒14
seven papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Identifying preferences in networks with bounded degree By Áureo de Paula; Seth Richards-Shubik; Elie Tamer
  2. An econometric model of network formation with degree heterogeneity By Bryan S. Graham
  3. Fixed-effect regressions on network data By Koen Jochmans; Martin Weidner
  4. The Social Effects of Ethnic Diversity at the Local Level: A Natural Experiment with Exogenous Residential Allocation By Yann Algan; Camille Hémet; David Laitin
  5. Reassessing Railroads and Growth: Accounting for Transport Network Endogeneity By Swisher IV, S. N.
  6. Speeding up the internet: regulation and investment in European fiber optic infrastructure By Wolfgang Briglauer; Carlo Cambini,; Michał Grajek
  7. Cross-border co-authorships in scientific articles and knowledge flows: implications for investigating an emerging international system of innovation By Leonardo Costa Ribeiro; Márcia Siqueira Rapini; Leandro Alves Silva; Eduardo da Motta e Albuquerque

  1. By: Áureo de Paula (Institute for Fiscal Studies and University College London); Seth Richards-Shubik (Institute for Fiscal Studies); Elie Tamer (Institute for Fiscal Studies and Harvard University)
    Abstract: This paper provides a framework for identifying preferences in a large network where links are pairwise stable. Network formation models present dificulties for identification, especially when links can be interdependent: e.g., when indirect connections matter. We show how one can use the observed proportions of various local network structures to learn about the underlying preference parameters. The key assumption for our approach restricts individuals to have bounded degree in equilibrium, implying a fi nite number of payoff -relevant local structures. Our main result provides necessary conditions for parameters to belong to the identi fied set. We then develop a quadratic programming algorithm that can be used to construct this set. With further restrictions on preferences, we show that our conditions are also suficient for pairwise stability and therefore characterize the identi fied set precisely. Overall, the use of both the economic model along with pairwise stability allows us to obtain e ffective dimension reduction.
    Keywords: preferences, networks, with bounded degree
    Date: 2016–12–16
  2. By: Bryan S. Graham (Institute for Fiscal Studies and University of California, Berkeley)
    Abstract: I introduce a model of undirected dyadic link formation which allows for assortative matching on observed agent characteristics (homophily) as well as unrestricted agent level heterogeneity in link surplus (degree heterogeneity). Like in fixed effects panel data analyses, the joint distribution of observed and unobserved agent-level characteristics is left unrestricted. Two estimators for the (common) homophily parameter, ß0 , are developed and their properties studied under an asymptotic sequence involving a single network growing large. The first, tetrad logit (TL), estimator conditions on a sufficient statistic for the degree heterogeneity. The second, joint maximum likelihood (JML), estimator treats the degree heterogeneity {Ai0}Ni=1 as additional (incidental) parameters to be estimated. The TL estimate is consistent under both sparse and dense graph sequences, whereas consistency of the JML estimate is shown only under dense graph sequences. Supplement for CWP 08/17
    Keywords: Network formation, homophily, degree heterogeneity, scale-free networks, incidental parameters, asymptotic bias, fixed effects, conditional likelihood, dependent U-Process
    JEL: C31 C33 C35
    Date: 2017–02–10
  3. By: Koen Jochmans (Institute for Fiscal Studies and Sciences Po); Martin Weidner (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: This paper studies inference on fixed eff ects in a linear regression model estimated from network data. We derive bounds on the variance of the fixed-e ffect estimator that uncover the importance of the smallest non-zero eigenvalue of the (normalized) Laplacian of the network and of the degree structure of the network. The eigenvalue is a measure of connectivity, with smaller values indicating less-connected networks. These bounds yield conditions for consistent estimation and convergence rates, and allow to evaluate the accuracy of first-order approximations to the variance of the fixed-eff ect estimator. Supplement for CWP32/16
    Keywords: fixed effects, graph, Laplacian, network data, variance bound
    JEL: C23 C55
    Date: 2016–08–08
  4. By: Yann Algan (Département d'économie); Camille Hémet (Aix-Marseille School of Economics); David Laitin (Department of Political Science (Stanford University))
    Abstract: Relying on diversity measures computed at the apartment block level under conditions of exogenous allocation of public housing in France, this paper identifies the effects of ethnic diversity on social relationships and housing quality. Housing Survey data reveal that diversity induces social anomie. Through the channel of anomie, diversity accounts for the inability of residents to sanction others for vandalism and to act collectively to demand proper building maintenance. However, anomie also lowers opportunities for violent confrontations, which are not related to diversity.
    Date: 2016–06
  5. By: Swisher IV, S. N.
    Abstract: Motivated by the seminal work of Robert Fogel on U.S. railroads, I reformulate Fogel’s original counter- factual history question on 19th century U.S. economic growth without railroads by treating the transport network as an endogenous equilibrium object. I quantify the effect of the railroad on U.S. growth from its introduction in 1830 to 1861. Specifically, I estimate the output loss in a counterfactual world with- out the technology to build railroads, but retaining the ability to construct the next-best alternative of canals. My main contribution is to endogenize the counterfactual canal network through a decentralized network formation game played by profit-maximizing transport firms. I perform a similar exercise in a world without canals. My counterfactual differs from Fogel’s in three main ways: I develop a structural model of transport link costs that takes heterogeneity in geography into account to determine the cost of unobserved links, the output distribution is determined in the model as a function of transport costs, and the transport network is endogenized as a stable result of a particular network formation game. I find that railroads and canals are strategic complements, not strategic substitutes. Therefore, the output loss can be quite acute when one or the other is missing from the economy. In the set of Nash stable networks, relative to the factual world, the median value of output is 45% lower in the canals only counterfactual and 49% lower in the railroads only counterfactual. With only one of the transportation technologies available, inequality in output across cities would have been lower in variance terms but sharply higher in terms of the maximum-minimum gap. Such a stark output loss is due to two main mechanisms: inefficiency of the decentralized equilibrium due to network externalities and complementarities due to spatial heterogeneity in costs across the two transport modes.
    Keywords: Economic growth, transport infrastructure, network formation games, strategic comple- ments, railroads, counterfactual history, multiple equilibria, computation, simulation
    JEL: E22 O11 N71 L92 R42
    Date: 2017–04–28
  6. By: Wolfgang Briglauer (Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW) Mannheim); Carlo Cambini, (Politecnico di Torino); Michał Grajek (ESMT European School of Management and Technology)
    Abstract: In this paper we study how the coexistence of access regulations for legacy (copper) and fiber networks shapes the incentives to invest in network infrastructure. To this end, we develop a theoretical model explaining investment incentives by incumbent telecom operators and heterogeneous entrants and test its main predictions using panel data from 27 EU member states over the last decade. Our theoretical model extends the existing literature by, among other things, allowing for heterogeneous entrants in internet access markets, as we consider both other telecom and cable TV operators as entrants. In the empirical part, we use a novel data set including information on physical fiber network investments, legacy network access regulation and recently imposed fiber access regulations. Our main finding is that more stringent access regulations for both the legacy and the fiber networks harm investments by incumbent telecom operators, but, in line with our theoretical model, do not affect cable TV operators.
    Keywords: Internet access market, access regulation, investment, infrastructure, next generation networks, broadband, telecoms, cable operators and Europe
    JEL: L96 L51
    Date: 2017–05–03
  7. By: Leonardo Costa Ribeiro (Inmetro-RJ); Márcia Siqueira Rapini (Cedeplar-UFMG); Leandro Alves Silva (Cedeplar-UFMG); Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: Size matters: the total of internationally co-authored scientific articles in 2015 corresponds to the global scientific production in 1993. The steady and systematic growth in international collaboration in science provides a strong basis for an emerging GIS. Therefore, it is important to map international flows that connect different national systems of innovation. This paper tracks knowledge flows through cross-border co-authorships in scientific publications, through a database with 10 million papers published in 2000, 2003, 2006 2009, 2012 and 2015. The data show an increase in international co-authorships from 10.7% in 2000 to 21.3% in 2015. However, this growth has network properties, since the number of international flows has grown from 545,372 in 2000 to 7,083,075 in 2015. Those international co-authorships signal networks of universities and research institutes, providing international connections to firms that eventually interact only locally with those universities and research institutes. The growth in the size, dimension and quality of those scientific flows strengthens a broad and variegated mosaic of interconnections can be grasped by the size of the network of cross-border co-authorships, a network that might be supporting an emerging and rudimentary global system of innovation.
    Keywords: Knowledge flows, International co-authorships, Science, Innovation systems
    JEL: O30
    Date: 2017–05

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