nep-net New Economics Papers
on Network Economics
Issue of 2017‒12‒11
three papers chosen by
Pedro CL Souza
Pontifícia Universidade Católica do Rio de Janeiro

  1. Urban Interactions By Kim, Jun Sung; Patacchini, Eleonora; Picard, Pierre M.; Zenou, Yves
  2. Network Formation with Multigraphs and Strategic Complementarities By Sumit Joshi; Sudipta Sarangi; Ahmed Saber Mahmud
  3. The Organization of Global Supply Networks By Loredana Fattorini; Armando Rungi; Zhen Zhu

  1. By: Kim, Jun Sung (Monash University); Patacchini, Eleonora (Cornell University, USA); Picard, Pierre M. (CREA, University of Luxembourg); Zenou, Yves (Monash University, Australia)
    Abstract: This paper studies social-tie formation when individuals care about the geographical location of other individuals. In our model, the intensity of social interactions can be chosen at the same time as friends. We characterize the equilibrium in terms of both social interactions and social capital (the value of social interactions offered by each agent) for a general distribution of individuals in the urban geographical space. We show that greater geographical dispersion decreases the incentives to socially interact. We also show that the equilibrium frequency of interactions is lower than the efficient one. Using a unique geo-coded dataset of friendship networks among adolescents in the United States, we estimate the model and validate that agents interact less than the social first best optimum. Our policy analysis suggests that, given the same cost, subsidizing social interactions yields a higher total welfare than subsidizing transportation costs.
    Keywords: Urban economics; Social interactions; Social capital; Policies
    JEL: R10 R23 Z13
    Date: 2017–11–28
  2. By: Sumit Joshi (George Washington University); Sudipta Sarangi (Virginia Tech); Ahmed Saber Mahmud (Johns Hopkins University)
    Abstract: Economic agents are typically connected to others in multiple network relationships, and the archi- tecture of one network could be shaped by connections in other networks. This paper examines the formation of one network when connections in a second network are inherited under two scenarios: (i) the inherited network is asymmetric allowing for a wide range of graphs called nested split graphs, and (ii) the inherited network is a symmetric type of network belonging to a subclass of regular graphs. Both the inherited and endogenously formed networks are interdependent because the respective actions in each are (weak) strategic complements. This property is su¢ cient to show that those who inherit high centrality will continue to have high centrality. Additionally, the network formed by the agents induces a coarser partition than the inherited network, suggesting the possibility of being able to improve network centrality, but only in a limited manner. Thus, our analysis explains preferential attachment and why inequality is often entrenched in society, how asymmetries in one network may be magniÖed or diminished in another, and what determines the identity of players occupying the various vertices of asymmetric equilibrium networks.
    Keywords: Network formation, multigraphs, strategic complementarities, Katz-Bonacich centrality, nested split graphs
    JEL: C72 D85
    Date: 2017
  3. By: Loredana Fattorini (IMT School for advanced studies); Armando Rungi (IMT School for advanced studies); Zhen Zhu (IMT School for advanced studies)
    Abstract: In this contribution, we introduce a network approach for the organization of global production across national borders, beyond the sequential industry-level metrics proposed in the previous literature. First, we show and argue that several characteristics of global production processes would be lost in the analysis when assuming that they could be proxied as linear sequences. Hence, we propose an index that assesses the relevance of any input for the target output, including its role as an input of inputs. Thereafter, we exploit an own-built firm-level dataset of about 20,489 U.S. parent companies integrating more than 154,000 affiliates worldwide. Results show that the technological relevance of an input in a directed supply network is also a good predictor for: i) the probability that an input industry is actually integrated within a firm boundary; ii) the number of affiliates that are controlled by the parent company and active in that input industry.
    Keywords: global value chains, supply networks, vertical integration, upstreamness, firm theory
    JEL: F23 L23 L22 D57 F14
    Date: 2017–11

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