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on Network Economics |
| By: | Faia, Ester; Mayer, Max; Pezone, Vincenzo |
| Abstract: | This paper presents causal evidence of the effects of boardroom networks on firm value and compensation policies. We exploit exogenous variation in network centrality arising from a ban on interlocking directorates of Italian financial and insurance companies. We leverage this shock to show that firms whose centrality in the network rises after the reform experience positive abnormal returns around the announcement date and are better hedged against shocks. Information dissemination plays a central role: results are driven by firms that have higher idiosyncratic volatility, low analyst coverage, and more uncertainty surrounding their earnings forecasts. Firms benefit more from boardroom centrality when they are more central in the input-output network, hence more susceptible to upstream shocks, when they are less central in the cross-ownership network, or when they have low profitability or low growth opportunities. Network centrality also results in higher directors' compensation, due to rent sharing and improved executives' outside option, and more similar compensation policies between connected firms. |
| Keywords: | executives' compensation; firms networks; Natural Experiment |
| JEL: | D57 G14 G32 L14 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14591&r=all |
| By: | Elliott, M.; Golub, B; Leduc, M. V. |
| Abstract: | We model the production of complex goods in a large supply network. Firms source several essential inputs through relationships with other firms. Due to the risk of such supply relationships being idiosyncratically disrupted, firms multisource inputs and invest to make relationships with suppliers stronger. In equilibrium, aggregate production is robust to idiosyncratic disruptions. However, depending on parameters, the supply network may be robust or arbitrarily sensitive to small aggregate shocks that affect the functioning of relationships. We give conditions under which the equilibrium network is driven to a fragile configuration, where arbitrarily small aggregate shocks cause discontinuous losses. We use the model to provide a unified account of a number of stylized facts about complex economies. |
| Date: | 2020–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2028&r=all |
| By: | Carayol, Nicolas; Henry, Emeric; Lanoe, Marianne |
| Abstract: | Production of knowledge relies on peer effects and interactions between researchers. However, little is known on how much policies may stimulate these peer effects. In this paper we shed light on this question, and show how a public "research cluster" policy, which funds local networks of researchers working on a common theme, affects the organization of research within these clusters and the productivity of its members. Using data from a large scale financing program in France, and relying on an identification strategy based on grades awarded by reviewers, we show that members of financed clusters increase by up to 30% the research collaborations they have with other members of the cluster, compared to researchers of non selected proposals. This very large reorganization of the research network translates into a more modest positive effect on research productivity. Paradoxically, those who benefit the most from the financing, are those who were not at the core of the research topic, i.e. were not cited in the bibliography of the research proposal, who significantly increase their links with core members and their total publication counts. Consistently, the policy reduces inequality in publication outcomes within the cluster. It stimulates peer effects to the benefit of periphery members. |
| Keywords: | cluster policy; economics of science; peer effects; Research funding |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14589&r=all |
| By: | Pablo D. Fajgelbaum; Amit Khandelwal; Wookun Kim; Cristiano Mantovani; Edouard Schaal |
| Abstract: | We study optimal dynamic lockdowns against Covid-19 within a commuting network. Our framework combines canonical spatial epidemiology and trade models, and is applied to cities with varying initial viral spread: Seoul, Daegu and NYC-Metro. Spatial lockdowns achieve substantially smaller income losses than uniform lockdowns, and are not easily approximated by simple centrality-based rules. In NYM and Daegu -with large initial shocks- the optimal lockdown restricts inflows to central districts before gradual relaxation, while in Seoul it imposes low temporal but large spatial variation. Actual commuting responses were too weak in central locations in Daegu and NYM, and too strong across Seoul. |
| Keywords: | COVID-19, commuting, network, optimal policy |
| JEL: | R38 R4 C6 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1187&r=all |
| By: | Agostinelli, Francesco; Doepke, Matthias; Sorrenti, Giuseppe; Zilibotti, Fabrizio |
| Abstract: | As children reach adolescence, peer interactions become increasingly central to their development, whereas the direct influence of parents wanes. Nevertheless, parents may continue to exert leverage by shaping their children's peer groups. We study interactions of parenting style and peer effects in a model where children's skill accumulation depends on both parental inputs and peers, and where parents can affect the peer group by restricting who their children can interact with. We estimate the model and show that it can capture empirical patterns regarding the interaction of peer characteristics, parental behavior, and skill accumulation among US high school students. We use the estimated model for policy simulations. We find that interventions (e.g., busing) that move children to a more favorable neighborhood have large effects but lose impact when they are scaled up because parents' equilibrium responses push against successful integration with the new peer group. |
| Keywords: | neighborhood effects; Parenting; parenting style; peer effects; skill acquisition |
| JEL: | I24 J13 J24 R20 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14637&r=all |
| By: | Makoto Naraoka; Teruaki Hayashi; Yukio Ohsawa; Takaaki Yoshino; Toshiaki Sugie; Kota Takano |
| Abstract: | We study the method for detecting relationship changes in financial markets and providing human-interpretable network visualization to support the decision-making of fund managers dealing with multi-assets. First, we construct co-occurrence networks with each asset as a node and a pair with a strong relationship in price change as an edge at each time step. Second, we calculate Graph-Based Entropy to represent the variety of price changes based on the network. Third, we apply the Differential Network to finance, which is traditionally used in the field of bioinformatics. By the method described above, we can visualize when and what kind of changes are occurring in the financial market, and which assets play a central role in changes in financial markets. Experiments with multi-asset time-series data showed results that were well fit with actual events while maintaining high interpretability. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2005.10603&r=all |
| By: | Giulietti, Corrado; Vlassopoulos, Michael; Zenou, Yves |
| Abstract: | We provide first evidence that peer depression in adolescence affects own depression in adulthood. We use data from Add Health and an identification strategy that relies on within-school and across-cohort idiosyncratic variation in the share of own-gender peers who are depressed. We find a significant peer effect for females but not for males. An increase of one standard deviation of the share of own-gender peers (schoolmates) who are depressed increases the probability of depression in adulthood by 2.6 percentage points for females (or 11.5% of mean depression). We also find that the peer effect is already present in the short term when girls are still in school and provide evidence for why it persists over time. Further analysis reveals that individuals from families with a lower socioeconomic background are more susceptible to peer influence, thereby suggesting that family can function as a buffer. Our findings underscore the importance of peer relationships in adolescence with regard to the development of long-lasting depression in women. |
| Keywords: | adolescence; Causal peer effects; Depression; Gender |
| JEL: | I12 Z13 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14681&r=all |
| By: | Jochmans, K. |
| Abstract: | Identification of peer effects is complicated by the fact that the individuals under study may self-select their peers. Random assignment to peer groups has proven useful to sidestep such a concern. In the absence of a formal randomization mechanism it needs to be argued that assignment is `as good as' random. This paper introduces a simple yet powerful test to do so. We provide theoretical results for this test and explain why it dominates existing alternatives. Asymptotic power calculations and an analysis of the assignment mechanism of players to playing partners in tournaments of the Professional Golfer's Association is used to illustrate these claims. Our approach can equally be used to test for the presence of peer effects. To illustrate this we test for the presence of peer effects in the classroom using kindergarten data collected within Project STAR. We find no evidence of peer effects once we control for classroom fixed effects and a set of student characteristics. |
| Keywords: | asymptotic power, bias, peer effects, random assignment |
| JEL: | C12 C21 |
| Date: | 2020–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2024&r=all |
| By: | Zhibin Niu; Runlin Li; Junqi Wu; Dawei Cheng; Jiawan Zhang |
| Abstract: | Groups of enterprises can guarantee each other and form complex networks to obtain loans from commercial banks. During economic slowdown period, the corporate default may spread like a virus and lead to large-scale defaults or even systemic financial crises. To help the financial regulatory authorities and banks manage the risk brought by the networked loans, we identified the default contagion risk as a pivotal issue to take preventive measures, and develop iConVis, an interactive visual analysis tool, to facilitate the closed-loop analysis process. A novel financial metric - contagion effect is formulated to quantify the infectious consequence of the guarantee chains in the network. Based on the metric, we design and implement a serial of novel and coordinated views to address the analysis the financial problem. Experts evaluated the system using real-world financial data. The proposed approach grants them the ability to overturn the previous ad hoc analysis methodology and extends the coverage of the conventional Capital Accord in the banking industry. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2006.09542&r=all |
| By: | Jorge Lorca; Emerson Melo |
| Abstract: | This paper studies the problem of optimal path selection in a directed network by decision makers that have an intrinsic distaste for evaluating too many options. We propose a recursive logit model that incorporates choice aversion along the lines introduced by Fudenberg and Strzalecki (2015). We derive optimal flow allocations both sequentially and from a path-choice perspective, which is robust to the presence of overlapping routes. We obtain a tight characterization of welfare in terms of both the network topology and the degree of choice aversion, where we derive comparative statics consistent with previous research. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:879&r=all |