nep-net New Economics Papers
on Network Economics
Issue of 2020‒03‒09
eight papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Siblings' Effects on College and Major Choices: Evidence from Chile, Croatia and Sweden By Christopher Neilson; Adam Altmejd; Andres Barrios-Fernandez; Marin Drlje; Dejan Kovac
  2. Crisis contagion in the world trade network By C\'elestin Coquid\'e; Jos\'e Lages; Dima L. Shepelyansky
  3. The interconnectedness of the economic content in the speeches of the US Presidents By Matteo Cinellia Valerio Ficcadenti; Jessica Riccionib
  4. Tax knowledge diffusion via strategic alliances By Müller, Jens; Weinrich, Arndt
  5. How do countries specialize in food production? A complex-network analysis of the global agricultural product space By Campi, Mercedes; Dueñas, Marco; Fagiolo, Giorgio
  6. Network-Aware Strategies in Financial Systems By P\'al Andr\'as Papp; Roger Wattenhofer
  7. Convex Combinatorial Auction of Pipeline Network Capacities By D\'avid Csercsik
  8. Vulnerabilities of Networked Energy Infrastructure : A Primer By Schweikert,Amy Elizabeth; Nield,Lindsey; Otto,Erica; Klemun,Magdalena; Ojanpera,Sanna Maria; Deinert,Mark Robert

  1. By: Christopher Neilson (Princeton University); Adam Altmejd (Stockholm School of Economics and Stockholm University); Andres Barrios-Fernandez (London School of Economics); Marin Drlje (Center for Economic Research & Graduate Education - Economics Institute); Dejan Kovac (Princeton University)
    Abstract: While it is a widely held belief that family and social networks can influence important life decisions, identifying causal effects is notoriously difficult. This paper presents causal evidence from three countries at different stages of economic development that the educational trajectories of older siblings can signiï¬ cantly influence the college and major choice of younger siblings. We exploit institutional features of centralized college assignment systems in Chile, Croatia, and Sweden to generate quasi-random variation in the educational paths taken by older siblings. Using a regression discontinuity design, we show that younger siblings in each country are signiï¬ cantly more likely to apply and enroll in the same college and major that their older sibling was assigned to. These results persist for siblings far apart in age who are unlikely to attend higher education at the same time. We propose three broad classes of mechanisms that can explain why the trajectory of an older sibling can causally affect the college and major choice of a younger sibling. We ï¬ nd that spillovers are stronger when older siblings enroll and are successful in majors that on average have higher scoring peers, lower dropout rates and higher earnings from graduates. The evidence presented shows that the decisions, and even random luck, of your close family members and peer network, can have signiï¬ cant effects on important life decisions such as the choice of specialization in higher education. The results also suggest that college access programs such as affirmative action, may have important spillover effects through family and social networks.
    JEL: I21 I24
    Date: 2020–01
  2. By: C\'elestin Coquid\'e; Jos\'e Lages; Dima L. Shepelyansky
    Abstract: We present a model of worldwide crisis contagion based on the Google matrix analysis of the world trade network obtained from the UN Comtrade database. The fraction of bankrupted countries exhibits an \textit{on-off} phase transition governed by a bankruptcy threshold $\kappa$ related to the trade balance of the countries. For $\kappa>\kappa_c$, the contagion is circumscribed to less than 10\% of the countries, whereas, for $\kappa
    Date: 2020–02
  3. By: Matteo Cinellia Valerio Ficcadenti; Jessica Riccionib
    Abstract: The speeches stated by influential politicians can have a decisive impact on the future of a country. In particular, the economic content of such speeches affects the economy of countries and their financial markets. For this reason, we examine a novel dataset containing the economic content of 951 speeches stated by 45 US Presidents from George Washington (April 1789) to Donald Trump (February 2017). In doing so, we use an economic glossary carried out by means of text mining techniques. The goal of our study is to examine the structure of significant interconnections within a network obtained from the economic content of presidential speeches. In such a network, nodes are represented by talks and links by values of cosine similarity, the latter computed using the occurrences of the economic terms in the speeches. The resulting network displays a peculiar structure made up of a core (i.e. a set of highly central and densely connected nodes) and a periphery (i.e. a set of non-central and sparsely connected nodes). The presence of different economic dictionaries employed by the Presidents characterize the core-periphery structure. The Presidents' talks belonging to the network's core share the usage of generic (non-technical) economic locutions like "interest" or "trade". While the use of more technical and less frequent terms characterizes the periphery (e.g. "yield" ). Furthermore, the speeches close in time share a common economic dictionary. These results together with the economics glossary usages during the US periods of boom and crisis provide unique insights on the economic content relationships among Presidents' speeches.
    Date: 2020–02
  4. By: Müller, Jens; Weinrich, Arndt
    Abstract: This study examines strategic alliances as channels for tax knowledge diffusion between firms. Although strategic alliances are primarily expected to foster their main business purposes, we focus on whether tax knowledge potentially diffuses as a second order effect of peer-to-peer cooperation. To tease out diffusion of tax knowledge, we investigate changes in the tax planning behavior of high-tax firms in strategic alliances with low-tax firms in comparison to high-tax firms in strategic alliances with other high-tax firms. Our results suggest an economically meaningful decrease of high-tax firms' cash effective tax rates when cooperating with low-tax firms. Additionally, we find that this adjustment occurs within two years of a strategic alliance's initiation. We apply textual analysis to control for the strategic alliances' main business purposes in our analyses. Because these activities do not appear to drive our findings, we argue to identify tax knowledge diffusion as a second order effect and conjecture that strategic alliances are not intended to be tax planning investments. Finally, we test whether partner characteristics intensify or mitigate the identified effects. Overall, our results provide robust evidence for tax knowledge diffusion via strategic alliances.
    Keywords: Corporate Tax Planning/Avoidance,Knowledge Diffusion,Network,Strategic Alliance
    JEL: C31 G34 H26
    Date: 2020
  5. By: Campi, Mercedes; Dueñas, Marco; Fagiolo, Giorgio
    Abstract: In the last years, there has been a growing interest in studying the global food system as a complex evolving network. Much of the literature has been focusing on the way countries are interconnected in the food system through international-trade linkages, and what consequences this may have in terms of food security and sustainability. Little attention has been instead devoted to understanding how countries, given their capabilities, specialize in agricultural production and to the determinants of country specialization patterns. In this paper, we start addressing this issue using FAO production data for the period 1993-2013. We characterize the food production space as a time-sequence of bipartite networks, connecting countries to the agricultural products they produce, and we identify properties and determinants underlying their evolution. We find that the agricultural product space is a very dense network, which however displays well-defined and stable communities of countries and products, despite the unprecedented pressure that food systems have been undergoing in recent years. We also find that the observed community structures are not only shaped by agro-ecological conditions but also by economic, socio-political, and technological factors. Finally, we discuss the implications that such findings may have on our understanding of the complex relationships involving country production capabilities, their specialization patterns, food security, and the nutrition content of the domestic part of their food supply.
    Keywords: Food systems; Food production; Specialization; Bipartite networks; Community structure detection; Hypergeometric filtering
    JEL: Q18 E23 N50
    Date: 2020–02
  6. By: P\'al Andr\'as Papp; Roger Wattenhofer
    Abstract: We study the incentives of banks in a financial network, where the network consists of debt contracts and credit default swaps (CDSs) between banks. One of the most important questions in such a system is the problem of deciding which of the banks are in default, and how much of their liabilities these banks can pay. We study the payoff and preferences of the banks in the different solutions to this problem. We also introduce a more refined model which allows assigning priorities to payment obligations; this provides a more expressive and realistic model of real-life financial systems, while it always ensures the existence of a solution. The main focus of the paper is an analysis of the actions that a single bank can execute in a financial system in order to influence the outcome to its advantage. We show that removing an incoming debt, or donating funds to another bank can result in a single new solution that is strictly more favorable to the acting bank. We also show that increasing the bank's external funds or modifying the priorities of outgoing payments cannot introduce a more favorable new solution into the system, but may allow the bank to remove some unfavorable solutions, or to increase its recovery rate. Finally, we show how the actions of two banks in a simple financial system can result in classical game theoretic situations like the prisoner's dilemma or the dollar auction, demonstrating the wide expressive capability of the financial system model.
    Date: 2020–02
  7. By: D\'avid Csercsik
    Abstract: In this paper we propose a mechanism for the allocation of pipeline capacities, assuming that the participants bidding for capacities do have subjective evaluation of various network routes. The proposed mechanism is based on the concept of bidding for route-quantity pairs. Each participant defines a limited number of routes and places multiple bids, corresponding to various quantities, on each of these routes. The proposed mechanism assigns a convex combination of the submitted bids to each participant, thus its called convex combinatorial auction. The capacity payments in the proposed model are determined according to the Vickrey-Clarke-Groves principle. We compare the efficiency of the proposed algorithm with a simplified model of the method currently used for pipeline capacity allocation in the EU (simultaneous ascending clock auction of pipeline capacities) via simulation, according to various measures, such as resulting utility of players, utilization of network capacities, total income of the auctioneer and fairness.
    Date: 2020–02
  8. By: Schweikert,Amy Elizabeth; Nield,Lindsey; Otto,Erica; Klemun,Magdalena; Ojanpera,Sanna Maria; Deinert,Mark Robert
    Abstract: Considerable work has been done to understand and improve the resilience of individual infrastructure components. However, systems of components, or even systems of systems, are far less well understood. Cascade effects, where the loss of one infrastructure affects others, is a major source of vulnerability which can lead to catastrophic disruptions of essential services. Interdependencies can also lead to large-scale failures when even a single component is disrupted and results in'cascading'failures within and between networks. This is particularly true for power systems, as many other lifeline infrastructure systems rely on electricity. In this study we review the literature and give a primer on the vulnerabilities of networked energy infrastructure. Several recurrent themes emerge from across different systems: (1) Electricity is essential for many lifeline infrastructure systems to function; (2) Electrical distribution systems are particularly vulnerable to disruption from natural and manmade hazards; (3) Highly networked systems can be unstable even when their individual components are functioning as intended; (4) Redundancy and network density can increase reliability but also increase the likelihood of cascade effects when failures do occur; (5) Disruption of ports and roads can limit fuel supplies for generators and replacement components. Based on these insights, this study offers suggestions for further research and policy actions.
    Keywords: Energy Policies&Economics,Energy and Mining,Energy and Environment,Energy Demand,Transport Services,Natural Disasters,Ports&Waterways
    Date: 2019–06–17

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