nep-net New Economics Papers
on Network Economics
Issue of 2020‒06‒15
twelve papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Detecting Latent Communities in Network Formation Models By Ma, Shujie; Su, Liangjun; Zhang, Yichong
  2. A Dynamic Structural Model of Virus Diffusion and Network Production: A First Report By Aguirregabiria, Victor; Gu, Jiaying; Luo, Yao; Mira, Pedro Solbes
  3. Social Interactions in Pandemics: Fear, Altruism, and Reciprocity By Alfaro, Laura; Faia, Ester; Lamersdorf, Nora; Saidi, Farzad
  4. Horizontal cooperation on investment: Evidence from mobile network sharing By Cojoc, Anca; Ivaldi, Marc; Maier-Rigaud, Frank; März, Oliver
  5. Peer effects in art prices By Maria Marchenko
  6. Body Mass Index and Social Interactions from Adolescence to Adulthood By Luisa Corrado; Roberta Distante; Majlinda Joxhe
  7. The spatial extent of network externalities in international migration By Roberto Basile; Francesca Licari
  8. Friendship Networks and Political Opinions: A Natural Experiment among Future French Politicians By Yann Algan; Nicolò Dalvit; Quoc-Anh Do; Alexis Le Chapelain; Yves Zenou
  9. Do neighbors help finding a job? Social networks and labor market outcomes after plant closures By Jahn, Elke; Neugart, Michael
  10. High-Ability Influencers? The Heterogeneous Effects of Gifted Classmates By Simone Balestra; Aurelien Sallin; Stefan C. Wolter
  11. Global Value Chains and the Productivity of Firms in MENA countries: Does Connectivity Matter? By Rym AYADI; Giorgia GIOVANNETTI; Enrico MARVASI; Chahir ZAKI
  12. Network-based Connectedness and the Diffusion of Cultural Traits By Riccardo Turati

  1. By: Ma, Shujie (University of California, Riverside); Su, Liangjun (School of Economics, Singapore Management University); Zhang, Yichong (School of Economics, Singapore Management University)
    Abstract: This paper proposes a logistic undirected network formation model which allows for assortative matching on observed individual characteristics and the presence of edge-wise fixed effects. We model the coefficients of observed characteristics to have a latent community structure and the edge-wise fixed effects to be of low rank. We propose a multi-step estimation procedure involving nuclear norm regularization, sample splitting, iterative logistic regression and spectral clustering to detect the latent communities. We show that the latent communities can be exactly recovered when the expected degree of the network is of order log n or higher, where n is the number of nodes in the network. The finite sample performance of the new estimation and inference methods is illustrated through both simulated and real datasets.
    Keywords: Community detection; homophily; spectral clustering; strong consistency; unobserved heterogeneity
    Date: 2020–05–07
  2. By: Aguirregabiria, Victor; Gu, Jiaying; Luo, Yao; Mira, Pedro Solbes
    Abstract: This paper presents a dynamic structural model to evaluate economic and public health effects of the diffusion of COVID-19, as well as the impact of factual and counterfactual public policies. Our framework combines a SIR epidemiological model of virus diffusion with a structural game of network production and social interactions. The economy comprises three types of geographic locations: homes, workplaces, and consumption places. Each individual has her own set of locations where she develops her life. The combination of these sets for all the individuals determines the economy's production and social network. Every day, individuals choose to work and consume either outside (with physical interaction with other people) or remotely (from home, without physical interactions). Working (and consuming) outside is more productive and generates stronger complementarities (positive externality). However, in the presence of a virus, working outside facilitates infection and the diffusion of the virus (negative externality). Individuals are forward-looking. We characterize an equilibrium of the dynamic network game and present an algorithm for its computation. We describe the estimation of the parameters of the model combining several sources of data on COVID-19 in Ontario, Canada: daily epidemiological data; hourly electricity consumption data; and daily cell phone data on individuals' mobility. We use the model to evaluate the health and economic impact of several counterfactual public policies: subsidies for working at home; testing policies; herd immunity; and changes in the network structure. These policies generate substantial differences in the propagation of the virus and its economic impact.
    Keywords: COVID-19; Disease-Specific Public Health Interventions; dynamics; Production and social networks; Production externalities; Virus diffusion
    JEL: C57 C73 I18 L14 L23
    Date: 2020–05
  3. By: Alfaro, Laura; Faia, Ester; Lamersdorf, Nora; Saidi, Farzad
    Abstract: In SIR models, homogeneous or with a network structure, infection rates are assumed to be exogenous. However, individuals adjust their behavior. Using daily data for 89 cities worldwide, we document that mobility falls in response to fear, as approximated by Google search terms. Combining these data with experimentally validated measures of social preferences at the regional level, we find that stringency measures matter less if individuals are more patient and altruistic (preference traits), and exhibit less negative reciprocity (community traits). We modify the homogeneous SIR and the SIR-network model to include agents' optimizing decisions on social interactions. Susceptible individuals internalize infection risk based on their patience, infected ones do so based on their altruism, and reciprocity matters for internalizing risk in SIR networks. A planner further restricts interactions due to a static and a dynamic inefficiency in the homogeneous SIR model, and due to an additional reciprocity inefficiency in the SIR-network model. We show that partial or targeted lockdown policies are efficient only when it is possible to identify infected individuals.
    Keywords: cities; mobility; Pandemics; SIR-Network; Social interactions; Social planner; social preferences; targeted policies
    JEL: D62 D64 D85 D91 I10
    Date: 2020–05
  4. By: Cojoc, Anca; Ivaldi, Marc; Maier-Rigaud, Frank; März, Oliver
    Abstract: We present a structural model to investigate the effects of horizontal cooperation on investment in the context of telecommunication networks. More specifically, we estimate the effect of network sharing in the mobile telecommunications industry on prices, network quality and consumer welfare. The presented framework allows estimating the effects of different types of sharing agreements including common ownership of shared assets in a joint venture company or collaboration via geographical separation (geo-split principle). The proposed identification strategy relies on differences in the costs of network deployment of shared versus non-shared network infrastructure, with different costs affecting operators' optimal choice of price and network quality. We apply the structural model to estimate the effects of a network sharing agreement in the Czech Republic, using a combination of unique datasets on prices, network quality measured as average download speed and operator's costs of network deployment. The results of our model indicate that horizontal cooperation on investments may be beneficial for consumers. Specifically, the network sharing agreement under study generated cost savings for the sharing parties, which were passed-on to consumers in the form of lower prices and higher average download speed. Our findings are of relevance to the assessment of network sharing agreements, which, considering the substantial investment cost associated with the 5G technology, are likely to play an even greater role in the telecommunications industry in the future. The findings are also of relevance to the general literature on horizontal cooperation on investments.
    JEL: L11 L40 L96
    Date: 2020–05
  5. By: Maria Marchenko (Department of Economics, Vienna University of Economics and Business)
    Abstract: Art often serves as an investment tool. However, the prices for some of the pieces are not easy to predict, and removing the price uncertainty is crucial to attracting even more investment in the art market. This paper assumes that the reputation of the artists and their social connections can play a significant role in determining the prices of their work. I check if a link to a higher valued or more famous peer has a positive effect on the prices of art pieces and on the probability of a successful sale. To test this hypothesis, I use the network of abstract artists, whose works' value is not always straightforward determined, and the prices of their works auctioned in 2000-2015 at Sotheby's, one of the most significant art and collectibles brokers in the world. The results suggest that consumers are willing to pay more for a particular artist's work, once there is a connection between the artist and a more valuable set of peers. However, the probability of sale is not affected. The auctioneer's predictions about future prices exhibit a similar trend.
    Keywords: peer effects, art prices, art market
    JEL: C49 D44 D85 Z11
    Date: 2020–05
  6. By: Luisa Corrado (University of Rome Tor Vergata, Italy); Roberta Distante (University of Copenhagen & Nordea, Denmark); Majlinda Joxhe (CREA, Université du Luxembourg)
    Abstract: We apply a dynamic linear-in-means model to analyze the importance of social ties for the body-weight-related behavior of US youth. Our methodology shows how to estimate peer effects free of the “reflection problem” in a dynamic context where individual- and group-specific unobservable effects are controlled for. Our results show that the main drivers for the body-weight-related behavior are past and peer effects. For individuals who were normal-weight or obese during adolescence, past and peer effects are shown to be both relevant. Peer effects, instead, explain more the variation in the BMI for individuals who were over-weight during adolescence, showing in this way the importance of social interactions for body-weight-related behavior.
    Keywords: Over-weight, Obesity, Peer Effects, Social Networks, Personal History, Dynamic Linear-in-means Model
    JEL: C01 D10 D71 I19 J11 Z13
    Date: 2019
  7. By: Roberto Basile (Department of Industrial and Information Engineering and Economics. University of L'Aquila); Francesca Licari (Italian National Institute of Statistics (ISTAT))
    Abstract: In this paper, we assess the effect of community networks on the location choice of foreign immigrants in Italy. Our results confirm the existence of strong network externalities, but they also suggest that these effects spill over the borders of local labor markets areas (LLMAs). Significant positive spatial spillovers are indeed evident up to the second-order of contiguity, while a negative (spatial competition) effect emerges at the third-order. A possible channel for the generation of these spatial spillovers is the existence of common markets for unskilled and ethnic-specific jobs.
    Keywords: Community networks, Immigration, Gravity models, Spatial dependence
    JEL: F22 J61 R23 C14 C21
    Date: 2020–05
  8. By: Yann Algan (Département d'économie); Nicolò Dalvit (Département d'économie); Quoc-Anh Do (Département d'économie); Alexis Le Chapelain; Yves Zenou (Research Institute of Industrial Economics)
    Abstract: We study how friendship shapes students' political opinions in a natural experiment. We use the indicator whether two students were exogenously assigned to a short-term "integration group", unrelated to scholar activities and dissolved before the school year, as instrumental variable for their friendship, to estimate the effect of friendship on pairwise political opinion outcomes in dyadic regressions. After six months, friendship causes a reduction of differences in opinions by one quarter of the mean difference. It likely works through a homophily-enforced mechanism, by which friendship causes politically-similar students to join political associations together, which reinforces their political similarity. The effect is strong among initially similar pairs, but absent in dissimilar pairs. Friendship affects opinion gaps by reducing divergence, therefore polarization and extremism, without forcing individuals' views to converge. Network characteristics also matter to the friendship effect.
    Date: 2019–06
  9. By: Jahn, Elke; Neugart, Michael
    Date: 2020
  10. By: Simone Balestra; Aurelien Sallin; Stefan C. Wolter
    Abstract: This paper examines how exposure to students identified as gifted (IQ≥130) affects achievement in secondary school and enrollment in post-compulsory education. By using unique student-level administrative data on achievement combined with psychological examination records, we are able to study the causal impact of gifted students on their classmates in unprecedented detail. We find a positive and significant effect of the exposure to gifted students on school achievement in both math and language. The impact of gifted students is, however, highly heterogeneous along three dimensions. First, we observe the strongest effects among male students and high achievers. Second, we show that male students benefit from the presence of gifted peers in all subjects regardless of their gender, whereas female students seem to benefit exclusively from the presence of female gifted students. Third, we find that gifted students diagnosed with emotional or behavioral disorders have zero-to-negative effects on their classmates' performance, a detrimental effect more pronounced for female students. After compulsory schooling, the results show that exposure to gifted classmates increases the likelihood of choosing a selective academic track. This effect, however, is entirely driven by male students.
    Keywords: gifted students, peer quality, gender, math, peer effects
    JEL: I21 I24 I26 J24
    Date: 2020–05
  11. By: Rym AYADI; Giorgia GIOVANNETTI; Enrico MARVASI; Chahir ZAKI
    Abstract: We provide new evidence on the participation of firms within Global Value Chains (GVCs) for a large pool of MENA countries included in the World Bank Enterprise Surveys (WBES). Making use of several firm-level GVC participation indices, we find a positive association with firm productivity gains. Based on this result, we further investigate the complexity of GVC relationships and examine how sector/country connectivity affects firm productivity. Using a multi-level model, we augment our analysis by including centrality indicators calculated on the intermediate trade network, constructed from the EORA input-output tables. Positioning within the network structure of trade in intermediate products also plays a role. Our results indicate a positive effect of the connectivity of the sector on the Total Factor Productivity (TFP) of firms. Results remain robust after we control for the endogeneity between firm productivity and participation in GVCs.
    Keywords: global value chains, firm heterogeneity, MENA region, trade networks, productivity.
    JEL: F14 F15 L23 L25
    Date: 2020
  12. By: Riccardo Turati (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper empirically investigates the impact of network-based connectedness on the diffusion of cultural traits. Using Gallup World Poll data on 148 countries on individual connectedness, opinions and beliefs, we find that natives who have a connection abroad are associated with higher levels of social behavior, religiosity and gender-egalitarian attitudes. Due to the endogenous nature of the variables, we strongly mitigate the threat of selection into connectedness by showing robust estimates even after controlling for broad measure of connectedness and performing propensity score and covariate matching techniques. Statistical tests are carefully implemented to quantify the selection threat of unobserved factors, which appears negligible. Our evidence shows that connectedness leads to cultural convergence across regions, while increases cultural heterogeneity within regions. Exploring the mechanisms by which these effects occur, we provide evidence that the effects are precisely estimated among less educated natives and that connectedness affects economic outcomes through remittances. We estimate differential cultural effects based on the connection’s country of residence, suggesting a destination-specific transfer of norms. Overall, the effects on social behavior are sizeable at the global level, once simulations based on estimated coefficients are performed. Although robust and certainly not negligible, gender-egalitarian and pro-religiosity effects of connectedness are limited.
    Keywords: Cultural change, connectedness, international migration, gender-egalitarian views, religiosity, social behavior
    JEL: F22 O15 Z10
    Date: 2020–03–27

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