nep-net New Economics Papers
on Network Economics
Issue of 2020‒08‒10
twelve papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Production and financial networks in interplay: Crisis evidence from supplier-customer and credit registers By Huremovic, Kenan; Jiménez, Gabriel; Moral-Benito, Enrique; Vega-Redondo, Fernando; Peydró, José-Luis
  2. Peer Effects in Networks: a Survey By Bramoullé, Yann; Djebbari, Habiba; Fortin, Bernard
  3. Core-stability over networks with widespread externalities By László Á. Kóczy
  4. Social Groups and the Effectiveness of Protests By Marco Battaglini; Rebecca B. Morton; Eleonora Patacchini
  5. The limits of verification in preventing the spread of false information on networks By Kinga Makovi; Manuel Munoz-Herrera
  6. Systemic Risk: a Network Approach By Jean-Baptiste Hasse
  7. Occupational mismatch and network effects: Evidence from France By Arnaud Herault
  8. On Competition For Spatially Distributed Resources On Networks By Giorgio Fabbri; Silvia Faggian; Giuseppe Freni
  9. Network development and excess travel time By Chantal Roucolle; Tatiana Seregina; Miguel Urdanoz
  10. Synchronization of globalized economies By Edgar J. Sánchez Carrera; Vanesa Avalos-Gaytán; Yajaira Cardona Valdés
  11. A Dynamic Network of Arbitrage Characteristics By Li, S.; Linton, O.
  12. Effects of inter-industry and spatial spillovers on regional productivity: Evidence from Spanish panel data By Álvarez, Inmaculada C.; Gude, Alberto; Orea, Luis

  1. By: Huremovic, Kenan; Jiménez, Gabriel; Moral-Benito, Enrique; Vega-Redondo, Fernando; Peydró, José-Luis
    Abstract: We show that bank shocks originating in the fi nancial sector propagate upstream and downstream along the production network and triple the impact of direct bank shocks. Our identi fication relies on the universe of both supplier-customer transactions and bank loans in Spain, a standard operationalization of credit-supply shocks during the 2008-09 global crisis, and the proposed theoretical framework. The impact on real effects is strong, and similarly so, when considering: (i) direct bank shocks to firms versus fi rst-order inter firm contagion; (ii) first-order versus higher-order network effects; (iii) downstream versus upstream propagation; (iv) firm-speci fic versus economy-wide shocks. Market concentration ampli fies these effects.
    Keywords: networks,supply chains,shock propagation,credit supply,real effects of finance
    JEL: D85 E44 E51 G01 G21
    Date: 2020
  2. By: Bramoullé, Yann; Djebbari, Habiba; Fortin, Bernard
    Abstract: We survey the recent, fast-growing literature on peer effects in networks. An important recurring theme is that the causal identification of peer effects depends on the structure of the network itself. In the absence of correlated effects, the reflection problem is generally solved by network interactions even in non-linear, heterogeneous models. By contrast, microfoundations are generally not identified. We discuss and assess the various approaches developed by economists to account for correlated effects and network endogeneity in particular. We classify these approaches in four broad categories: random peers, random shocks, structural endogeneity and panel data. We review an emerging literature relaxing the assumption that the network is perfectly known. Throughout, we provide a critical reading of the existing literature and identify important gaps and directions for future research.
    Keywords: identification; networks; peer effects
    Date: 2019–12
  3. By: László Á. Kóczy (Institute of Economics, Centre for Economic and Regional Studies, Tóth Kálmán u. 4., H-1097 Budapest, Hungary and Department of Finance, Faculty of Economic and Social Sciences, Budapest University of Technology and Economics, Magyar tudósok körútja 2., H-1111 Budapest, Hungary)
    Abstract: The Covid-19 epidemic highlighted the significance of externalities: contacts with other people do not only affect our chances of getting infected but also our entire network.We introduce a model for coalitional network stability in networks with widespread externalities. The network function form generalises the partition function form of cooperative games in allowing the network structure to be taken into account. The recursive core for network function form games generalises the recursive core for such environments and its properties also rhyme with the corresponding inclusion properties of the optimistic and pessimistic recursive cores and can be seen as a modification of pairwise stability to a coalitional setting where the involvement of more players allows for the -- partial -- internalisation of the externalities, but we also allow residual players to endogenously respond to any externalities that may affect them. We present two simple examples to illustrate positive and negative externaliti.The first is of a favour network and show that the core is nonempty when players must pay transfers to intermediaries; this simple setting also models economic situations such as airline networks. The second models social contacts during an epidemic and finds social bubbles as the solution.
    Keywords: externalities, networks, recursive core, social bubble
    JEL: C71 C72
    Date: 2020–06
  4. By: Marco Battaglini; Rebecca B. Morton; Eleonora Patacchini (Division of Social Science)
    Abstract: We present an informational theory of public protests, according to which public protests allow citizens to aggregate privately dispersed information and signal it to the policy maker. The model predicts that information sharing of signals within social groups can facilitate information aggregation when the social groups are sufficiently large even when it is not predicted with individual signals. We use experiments in the laboratory and on Amazon Mechanical Turk to test these predictions. We find that information sharing in social groups significantly affects citizens' protest decisions and as a consequence mitigates the effects of high conflict, leading to greater efficiency in policy makers' choices. Our experiments highlight that social media can play an important role in protests beyond simply a way in which citizens can coordinate their actions; and indeed that the information aggregation and the coordination motives behind public protests are intimately connected and cannot be conceptually separated.
    Date: 2020–02
  5. By: Kinga Makovi; Manuel Munoz-Herrera (Division of Social Science)
    Abstract: The spread of false information on social networks has garnered ample scientific and popular attention. To counteract this spread, verification of the truthfulness of information has been proposed as a key intervention. Using a behavioral experiment with over 2000 participants we analyze individuals' willingness to spread false information in a network. All individuals in the network have aligned incentives, making lying attractive, countering an explicit norm of truth-telling that we imposed. We investigate how verifying the truth, endogenously or exogenously, impacts the choices to lie or to adhere to the norm of truth-telling, compared to a setting without the possibility of verification. The three key take-aways are: (i) verification is only moderately e ective in reducing the spread of lies; its effectivity is (ii) contingent on the agency of individuals to seek truth, and (iii) the exposure of liars, and not only the lies told. These suggest that verification is not a blanket solution. In order to enhance its e ectivity, it should be combined with fostering a culture of truth-seeking and with information on who spreads lies, not only on the lies told.
    Date: 2020–03
  6. By: Jean-Baptiste Hasse (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France)
    Abstract: We propose a new measure of systemic risk based on interconnectedness, defined as the level of direct and indirect links between financial institutions in a correlation-based network. Deriving interconnectedness in terms of risk, we empirically show that within a financial network, indirect links are strengthened during systemic events. The relevance of our measure is illustrated at both local and global levels. Our framework offers policymakers a useful toolbox for exploring the real-time topology of the complex structure of dependencies in financial systems and for measuring the consequences of regulatory decisions.
    Keywords: financial networks, interconnectedness, systemic risk, spillover
    JEL: G01 G15 G21
    Date: 2020–07
  7. By: Arnaud Herault (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)
    Abstract: How does the social environment of immigrants influence the probability of being in an occupational mismatch situation? To answer this question, we use the Labor Force Survey (2005-2012) to assess the impact of peers and the neighborhood on the use of referees to find a job on the one hand, and the probability of being in occupational mismatch situation on the other hand. With a probit model, we estimate the probability of using a referee to find a job as well as the probability of being in an occupational mismatch situation for immigrants. Endogeneity is controlled with a recursive bivariate probit model for the use of a referee to find a job and the probability of being in an occupational mismatch situation. The results show that the neighborhood effect has a greater effect than the peer effect on using referees to find a job. Moreover, the role of the referee on the probability of being in an occupational mismatch situation is not homogeneous according to the origins.
    Keywords: Neighborhood,labor market,networks,immigration,Occupational mismatch
    Date: 2019–06–06
  8. By: Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, France); Silvia Faggian (Department of Economics, Ca’ Foscari University of Venice, Italy); Giuseppe Freni (Department of Business and Economics, Parthenope University of Naples, Italy)
    Abstract: We study the dynamics of the exploitation of a natural resource, distributed in space and mobile, where spatial diversification is introduced by a network structure. Players are assigned to different nodes by a regulator, after he/she decides at which nodes natural reserves are established. The game solution shows how the dynamics of spatial distribution depends on the productivity of the various sites, on the structure of the connections between the various locations, and on the preferences of the agents. At the same time, the best locations to host a nature reserve are identified in terms of the parameters of the model, and it turns out they correspond to the most central (in the sense of eigenvector centrality) nodes of a suitably redefined network which takes into account the nodes productivities.
    Keywords: Harvesting, spatial models, differential games, nature reserve
    JEL: Q20 Q28 R11 C73
    Date: 2020–07–01
  9. By: Chantal Roucolle (ENAC - Ecole Nationale de l'Aviation Civile); Tatiana Seregina (ENAC - Ecole Nationale de l'Aviation Civile, TBS - Toulouse Business School); Miguel Urdanoz (Toulouse Business School - Toulouse Business School)
    Abstract: We study the impact of airlines network design on excess travel times for the main US carriers between 2008 and 2017 and find that network configuration affects excess travel time. Based on graph theory and a principal component analysis we build four continuous indicators to measure the airlines networks. We observe that airlines serving more destinations, organizing flights landings and take offs around banks or moving towards a point to point configuration present higher levels of excess travel time. However, there does not seem to exist a preferred network configuration between hub and spoke or point-to-point configuration to reduce excess travel time. We also find a nonlinear impact of competition measured at the city-pair level over excess travel time. These results are robust when analyzing observed delays rather than excess travel time.
    Keywords: Airline Delay,Congestion Network,Panel Data,Airline,Delay
    Date: 2020–08
  10. By: Edgar J. Sánchez Carrera (Department of Economics, Society & Politics, Universit? di Urbino Carlo Bo - Researh Fellow at the ResearchCenter in Applied Mathematics, Universidad Aut´onoma de Coahuila, Mexico); Vanesa Avalos-Gaytán (ResearchCenter in Applied Mathematics, Universidad Aut´onoma de Coahuila, Mexico); Yajaira Cardona Valdés (ResearchCenter in Applied Mathematics, Universidad Aut´onoma de Coahuila, Mexico)
    Abstract: Does the synchronization of globalized-oscillating economies matter for macroeconomic outcomes? If so, how oscillating economies are synchornized and conform stable networks. In this paper we apply phase oscillator models such as Kuramoto’s model to understand synchronization phenomena in networks of countries. Our aim is to study a network of interacting phase oscillating economies, and an adaptation mechanism for the coupling that promotes the connection strengths between those elements that are dynamically correlated. Under these circumstances, the dynamical organization of the oscillators/economies shapes the topology of the graph in such a way that modularity and assortativity features emerge spontaneously and simultaneously. Our results show the conformation of the network and the global and local synchronization measures for the 42 oscillating economies during the period from 1960 to 2018, using Trade (% of GDP) data. Moreover, we obtain the measure of local assortativity in the formation of those economies that more or less interact or are connected. We conclude that the Kuramoto model with networks is a useful tool to study economics synchronization.
    Keywords: Business Cycles, Complex Systems, Economics of Globalization, Network Topology, Synchronization, Trade Integration.
    JEL: D85 F14 F15 F41 F44
    Date: 2019
  11. By: Li, S.; Linton, O.
    Abstract: We propose an asset pricing factor model constructed with semi-parametric characteristics based mispricing and factor loading functions. This model captures common movements of stock excess returns and includes a two-layer network of arbitrage returns interconnected by security-specific characteristics. We approximate the unknown functions by B-splines where the number of B-splines coefficients is diverging. We estimate this model and test the existence of the mispricing function by a power enhanced hypothesis test. The enhanced test solves the low power problem caused by diverging B-spline coefficients. Meanwhile, the strengthened power approaches to one asymptotically. And the dynamic networks are explored through Hierarchical K-Means Clusterings. We apply our methodology to CRSP monthly data for the US stock market with one-year rolling windows during 1967-2017. This empirical study shows the presence of mispricing functions in certain time blocks and a dynamic network structure of arbitrage returns through groups of some characteristics.
    Keywords: Semiparametric, Characteristics-based, Network, Power-enhanced test
    JEL: C14 G11 G12
    Date: 2020–06–29
  12. By: Álvarez, Inmaculada C.; Gude, Alberto; Orea, Luis
    Abstract: This paper examines the role of both intra and inter-industry spillovers when estimating regional aggregate production functions. To our knowledge, this is the first paper that examines technological and spatial externalities simultaneously using sector-level data. The proposed model also extends the standard spatial econometric models by modeling interregional (spatial) dependence through the economic criteria of migration flows. We apply our methodology to the Spanish provinces over the 2001-2013 period. Our results reveal the simultaneous presence of both Marshallian and Jacobian externalities. The spillovers of private production factors are negative in most of the sectors, indicating the presence of inter-regional and inter-sectoral competition for skilled labor and private capital. Our results also indicate that the core-periphery theory can be applied to both fully efficient and inefficient sectors, a finding that should be examined more deeply in the future.
    Date: 2019

This nep-net issue is ©2020 by Alfonso Rosa García. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.