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on Network Economics |
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Issue of 2017‒06‒18
three papers chosen by Pedro CL Souza Pontifícia Universidade Católica do Rio de Janeiro |
| By: | Emily Breza; Arun G. Chandrasekhar; Tyler H. McCormick; Mengjie Pan |
| Abstract: | Social network data is often prohibitively expensive to collect, limiting empirical network research. Typical economic network mapping requires (1) enumerating a census, (2) eliciting the names of all network links for each individual, (3) matching the list of social connections to the census, and (4) repeating (1)-(3) across many networks. In settings requiring field surveys, steps (2)-(3) can be very expensive. In other network populations such as financial intermediaries or high-risk groups, proprietary data and privacy concerns may render (2)-(3) impossible. Both restrict the accessibility of high-quality networks research to investigators with considerable resources. We propose an inexpensive and feasible strategy for network elicitation using Aggregated Relational Data (ARD) – responses to questions of the form “How many of your social connections have trait k?” Our method uses ARD to recover the parameters of a general network formation model, which in turn, permits the estimation of any arbitrary node- or graph-level statistic. The method works well in simulations and in matching a range of network characteristics in real-world graphs from 75 Indian villages. Moreover, we replicate the results of two field experiments that involved collecting network data. We show that the researchers would have drawn similar conclusions using ARD alone. Finally, using calculations from J-PAL fieldwork, we show that in rural India, for example, ARD surveys are 80% cheaper than full network surveys. |
| JEL: | C83 D85 L14 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23491&r=net |
| By: | Eleonora Patacchini (Cornell University); Edoardo Rainone (Bank of Italy) |
| Abstract: | This paper studies the importance of social interactions for the adoption of financial services among young adults. Specifically, we investigate whether, how, and why financial decisions among interacting agents are correlated. We exploit a unique dataset of friendship networks in the United States and a novel estimation strategy that accounts for possibly endogenous network formation. We find that not all social contacts are equally important: only long-lasting relationships influence financial decisions. Moreover, this peer influence exists only in cohesive social structures. This evidence is consistent with an important role of trust in financial decisions. When agents consider whether or not to adopt a financial instrument, they face a risk and may place greater value on information coming from agents they trust. These results can help explain the importance of face-to-face social contacts for financial decisions. |
| Keywords: | financial market participation, financial literacy, social interactions, trust, network formation, endogeneity, Bayesian estimation |
| JEL: | C11 C31 D1 D14 D81 D85 G11 M31 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1115_17&r=net |
| By: | Facundo Albornoz; Antonio Cabrales; Esther Hauk |
| Abstract: | We study a model that integrates productive and socializing ef- forts with occupational choice in the presence of endogenous spillovers. Among other results, we show that more talented individuals work harder and contribute more to the emergence of externalities, but also have incentives to segregate. Average socializing increases in the average productivity of the occupation. Also, the size of an occupation grows in its network synergies. Turning to efficiency, we show that individuals underinvest in productive and socializing effort, and sort themselves inefficiently into occupations. We derive the optimal subsidy to achieve efficient effort within occupations and show that efficient sorting into occupations can always be achieved by a linear tax. We illustrate the importance for the government to intervene on both margins, as solving only the within occupation investment problem can exacerbate misallocations due to network choice and may even reduce welfare in presence of congestion costs. |
| Keywords: | occupational choice, Social interactions, endogenous spillovers, optimal taxation |
| JEL: | D85 H21 H23 J24 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:972&r=net |