nep-net New Economics Papers
on Network Economics
Issue of 2017‒10‒08
seven papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Distributions of Centrality on Networks By Krishna Dasaratha
  2. Estimation of Peer Effects in Endogenous Social Networks: Control Function Approach By Ida Johnsson; Hyungsik Roger Moon
  3. Product Network Connectivity and Information for Loan Pricing By Jiangtao Fu; Yoshiaki Ogura
  4. Identifying and Decomposing Peer Effects on Decision-Making Using a Randomized Controlled Trial By Daichi Shimamoto; Yasuyuki Todo; Yu Ri Kim; Petr Matous
  5. Incarcerate one to calm the others? Spillover effects of incarceration among criminal groups By Philippe, Arnaud
  6. The Strength of Absent Ties: Social Integration via Online Dating By Josue Ortega; Philipp Hergovich
  7. The effect of immigrant peers in vocational schools By Tommaso Frattini; Elena Meschi

  1. By: Krishna Dasaratha
    Abstract: In many social and economic networks, agents' outcomes depend substantially on the centrality of their network position. Our current understanding of network centrality is largely restricted to deterministic settings, but in many applications data limitations or theoretical concerns lead practitioners to use random network models. We provide a foundation for understanding how central agents in random networks are likely to be. Our main theorems show that on large random networks, centrality measures are close to their expected values with high probability. By applying these theorems to stochastic block models, we study how segregated networks contribute to inequality. When networks are segregated, benefits from peer effects tend to accrue unevenly to the advantage of more central individuals and groups. We also discuss applications to more general network formation models, including models where link probabilities are governed by geography.
    Date: 2017–09
  2. By: Ida Johnsson; Hyungsik Roger Moon
    Abstract: We propose a method of estimating the linear-in-means model of peer effects in which the peer group, defined by a social network, is endogenous in the outcome equation for peer effects. Endogeneity is due to unobservable individual characteristics that influence both link formation in the network and the outcome of interest. We propose two estimators of the peer effect equation that control for the endogeneity of the social connections using a control function approach. We leave the functional form of the control function unspecified and treat it as unknown. To estimate the model, we use a sieve semiparametric approach, and we establish asymptotics of the semiparametric estimator.
    Date: 2017–09
  3. By: Jiangtao Fu (Graduate School of Economics, Waseda University); Yoshiaki Ogura (School of Political Science and Economics, Waseda University)
    Abstract: A theory predicts that loan pricing is less sensitive to public information, such as a credit score provided by a credit information vendor, if the lender obtains more accurate private information about the credit quality of borrowers. We find that loan pricing is less sensitive to public information when a borrower is more connected with other borrowers of the lender through a supply network by using a unique database of inter-firm relationships and bank-firm relationships. This effect is significant statistically and economically after controlling for the bank-firm or inter-firm relationship characteristics and other firm characteristics. This finding provides evidence that banks make use of private information observed from their borrowers’ network in their loan pricing.
    Keywords: inter-firm network, loan pricing, information production, relationship banking
    JEL: G21 L14
  4. By: Daichi Shimamoto (Waseda Institute of Political Economy, Waseda University); Yasuyuki Todo (Graduate School of Economics, Waseda University); Yu Ri Kim (Faculty of Political Science and Economics, Waseda University and Graduate School of Frontier Sciences, The University of Tokyo); Petr Matous (School of Engineering, Department of Civil Engineering, The University of Tokyo and Complex Systems Research Group, Faculty of Engineering and IT, The University of Sydney)
    Abstract: This paper investigates peer effects on firm managers’ decisions. We invited 131 randomly selected firm representatives to three one-day seminars on export promotion. We found that peers' invitation in the seminars has a positive effect on firms' participation. We distinguish between peers' invitation on the same day and other days, finding that the former has a positive effect while the latter has no significant effect. These results imply that peer effects arise mostly through a reduction of psychological cost of participation. Our results suggest that multiple equilibria in the share of participants within each network of firms may emerge.
    Keywords: peer effects, social networks, information confirmation, free riding, randomized controlled trials
    JEL: C93 D22
  5. By: Philippe, Arnaud
    Abstract: This paper documents the effect of peers’ incarceration on an individual’s criminal activity within small criminal groups. Using established criminal groups, I built a 48-month panel that records the criminal status, Individual imprisonment status and imprisonment status of group members. Panel regressions with individual fixed effects allows me to document five facts. First, the incarceration of a peer is associated with a 5 per cent decrease in the arrest rate among groups composed of two persons. No effect is observed among bigger groups. Second, this effect is present even for incarceration following lone crimes, ruling out an explanation based on common shocks. Third, the probability of committing a group crime strongly decreases, and there is no shift to crime with other peers or lone crimes. Four, this general effect hides significant within-group heterogeneity. The results are consistent with the idea that ‘leaders’ are not affected by the incarceration of ‘followers’. Five, the effect seems to be driven by lower risky behaviour among offenders who remain free, and not by ‘criminal capital’ loss or deterrence.
    Date: 2017–09
  6. By: Josue Ortega; Philipp Hergovich
    Abstract: We used to marry people to which we were somehow connected to: friends of friends, schoolmates, neighbours. Since we were more connected to people similar to us, we were likely to marry someone from our own race. However, online dating has changed this pattern: people who meet online tend to be complete strangers. Given that one-third of modern marriages start online, we investigate theoretically, using random graphs and matching theory, the effects of those previously absent ties in the diversity of modern societies. We find that when a society benefits from previously absent ties, social integration occurs rapidly, even if the number of partners met online is small. Our findings are consistent with the sharp increase in interracial marriages in the U.S. in the last two decades.
    Date: 2017–09
  7. By: Tommaso Frattini (University of Milan, LdA, CReAM and IZA); Elena Meschi (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper provides new evidence on how the presence of immigrant peers in the classroom affects native student achievement. The analysis is based on longitudinal administrative data on two cohorts of vocational training students in Italy’s largest region. Vocational training institutions provide the ideal setting for studying these effects because they attract not only disproportionately high shares of immigrants but also the lowest ability native students. We adopt a value added model, and exploit within-school variation both within and across cohorts for identification. Our results show small negative average effects on maths test scores that are larger for low ability native students, strongly non-linear and only observable in classes with a high (top 20%) immigrant concentration. These outcomes are driven by classes with a high average linguistic distance between immigrants and natives, with no apparent role played by ethnic diversity.
    Keywords: Immigration, education, peer effects, vocational training, language
    JEL: I20 J15
    Date: 2017

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