nep-net New Economics Papers
on Network Economics
Issue of 2017‒06‒18
three papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Using Aggregated Relational Data to Feasibly Identify Network Structure without Network Data By Emily Breza; Arun G. Chandrasekhar; Tyler H. McCormick; Mengjie Pan
  2. Social ties and the demand for financial services By Eleonora Patacchini; Edoardo Rainone
  3. Occupational Choice with Endogenous Spillovers By Facundo Albornoz; Antonio Cabrales; Esther Hauk

  1. 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
  2. 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
  3. 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

This nep-net issue is ©2017 by Pedro CL Souza. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.