nep-net New Economics Papers
on Network Economics
Issue of 2021‒06‒14
nine papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions By Acemoglu, Daron; Tahbaz-Salehi, Alireza
  2. Escaping from Low-Wage Employment: The Role of Co-worker Networks By Anna Baranowska-Rataj; Zoltán Elekes; Rikard Eriksson
  3. Social Status in Student Networks and Implications for Perceived Social Climate in Schools By Sule Alan; Elif Bodur; Elif Kubilay; Ipek Mumcu
  4. Drug markets and COVID-19: A spatiotemporal study of drug offence detection rates in Brisbane, Australia By Payne, Jason Leslie; Langfield, Cameron Thomas
  5. Tracking the Herd with a Shotgun — Why Do Peers Influence College Major Selection? By Insler, Michael; Rahman, Ahmed S.; Smith, Katherine
  6. A Continuous-Time Model of Financial Clearing By Sonin, Isaac; Sonin, Konstantin
  7. Trusted Brokers in Rural Land Markets: Parish Case Studies in Scotland By Kato, Yumi Isaka; Hubbard, Carmen; Garrod, Guy
  8. The Conglomerate Network By Kenneth R. Ahern; Lei Kong; Xinyan Yan
  9. Social interactions and the prophylaxis of SI epidemics on networks By Géraldine Bouveret; Antoine Mandel

  1. By: Acemoglu, Daron; Tahbaz-Salehi, Alireza
    Abstract: This paper studies how firm failures and the resulting disruptions to supply chains can amplify negative shocks. We develop a non-competitive model where customized supplier-customer relations increase productivity, and the relationship-specific surplus generated between firms and their suppliers is divided via bargaining. Changes in productivity alter the distribution of surplus throughout the economy and determine which firms are at the margin of failure. A firm's failure may spread to its suppliers and customers and to firms in other parts of the production network. We provide existence, uniqueness, and a series of comparative statics results, and show how the response of the equilibrium production network may propagate recessionary shocks.
    Keywords: Amplification; Bargaining; business cycles; Economic Fluctuations; production networks; relationship-specific surplus; Supply Chains
    JEL: D57 E23 E32
    Date: 2020–07
  2. By: Anna Baranowska-Rataj (Department of Sociology, UmeA University and Centre for Demographic and Ageing Research, UmeA University); Zoltán Elekes (Agglomeration and Social Networks Research Group, Centre for Economic and Regional Studies and Department of Geography, UmeA University); Rikard Eriksson (Department of Geography, Umea University and Centre for Regional Science, Umea University)
    Abstract: Low-wage jobs are often regarded as dead-ends in the labour market careers of young people. Previous research focused on disentangling to what degree the association between a low-wage job at the start of working life and limited chances of transitioning to better-paid employment is causal or spurious. Less attention has been paid to the channels that may facilitate the upward wage mobility of low-wage workers. We focus on such mechanisms, and we scrutinize the impact of social ties to higher-educated co-workers. Due to knowledge spillovers, job referrals, as well as firm-level productivity gains, having higher-educated co-workers may improve an individual’s chances of transitioning to a better-paid job. We use linked employer-employee data from longitudinal Swedish registers and panel data models that incorporate measures of low-wage workers’ social ties to higher-educated co-workers. Our results confirm that having social ties to higher-educated co-workers increases individual chances of transitioning to better-paid employment.
    Keywords: co-worker networks, employer-employee data, low-wage, wage mobility
    JEL: C23 D85 J24 J31
    Date: 2021–05
  3. By: Sule Alan; Elif Bodur; Elif Kubilay; Ipek Mumcu
    Abstract: We investigate how adolescents’ social status in their peers’ eyes shapes the way they view their social climate in secondary schools. Utilizing novel data on over 10,000 students, we construct comprehensive measures of social status and perceived social climate for each student, including a sense of belonging, perceived behavioral norms, and bullying experience. We show that while central and well-connected students are positive about their social environment, less central and socially isolated students view it as hostile. Our results highlight the importance of improving the relational dynamics of adolescents in disadvantaged schools to create better learning environments for all.
    Keywords: social status, student networks, classroom climate
    JEL: A14 I20 I24
    Date: 2021
  4. By: Payne, Jason Leslie (Australian National University); Langfield, Cameron Thomas (Australian National University)
    Abstract: In many parts of the world, the social mobility restrictions and stay-at-home orders introduced during the early months of the COVID-19 pandemic have been associated with significant reductions in crime. However, contrary to this general finding, illicit drug offence detections increased significantly. In this study, we explore the geographical distribution of the increase in Queensland, Australia, using spatiotemporal generalised additive model (GAM) to identify locations in the Local Government Area (LGA) of Brisbane where drug offence detection rates were unusually high during the three months of the COVID-19 lockdown (April-June 2020). Contrary to expectation, we find that the increase in drug offence detection rates appears to have been modest in most places, but widespread and diffuse throughout the city. We conclude that drug offence detections are most likely to have increased incidentally, probably as a consequence of general street policing initiatives which saw an increase in the visibility and vulnerability of drug user communities. We do, however, identify five locations in Brisbane where the drug offence detection rate exceeded the prediction by a considerable margin (in one case, more than double the worst case prediction). We argue that in these locations the increase was likely the result of some spatial displacement of inner-city drug markets coupled with a series of targeted policing activities. Further research is needed to clarify the true mechanism of change in these locations.
    Date: 2021–05–23
  5. By: Insler, Michael (U.S. Naval Academy); Rahman, Ahmed S. (Lehigh University); Smith, Katherine (U.S. Naval Academy)
    Abstract: How do peers influence people's choices? We explore this fundamental question by exploiting unique data produced by, and a natural experiment conducted on, students from the United States Naval Academy (USNA). We develop a conceptual framework to highlight that individuals can emulate others for both information (social learning) and for socializing (network externalities). We then analyze data on the preliminary preferences and ultimate major selections of USNA freshmen, exploiting a rich set of covariates and the random assignment of students to peer groups. We find that students can be influenced by peers into selecting different academic paths relative to what they would have chosen on their own. Through random reassignments of certain student groups into new peer groups, we also explore the reasons why herding occurs. The preponderance of evidence suggests that social learning, as opposed to network externalities, is the key driver for herding behavior.
    Keywords: major selection, peer effects, higher education, herding, social networks
    JEL: D85 I21 I23 J24
    Date: 2021–06
  6. By: Sonin, Isaac; Sonin, Konstantin
    Abstract: We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as ``tanks'' filled with fluid (money), flowing in and out. Once the ``pipes'' connecting the ``tanks'' are open, the system reaches the clearing payment vector in finite time. This approach provides a simple recursive solution to a classical static model of financial clearing in bankruptcy, and suggests a practical payment mechanism. With sufficient resources, a system of mutual obligations can be restructured into an equivalent system that has a cascade structure: there is a group of banks that paid off their debts, another group that owes money only to banks in the first group, and so on. We demonstrate how the machinery of Markov chains can be used to analyze evolution of a deterministic dynamical system.
    Keywords: clearing vector; continuous time; Financial Networks; Markov chains
    JEL: G21 G33
    Date: 2020–07
  7. By: Kato, Yumi Isaka; Hubbard, Carmen; Garrod, Guy
    Abstract: This paper explores how social networks and government institutions work in rural land markets, with a special focus on the role of brokers. For this purpose, insights from New Economic Sociology (NES) and New Institutional Economics (NIE) are combined to build a theoretical framework, and a Social Network Analysis is applied to individual case studies. Specifically, two parishes in Scotland, where dynamic land pattern changes can be observed, were investigated. After the land market network for each parish was identified, the connections between actors were traced followed by in-depth interviews. The paper particularly examines the role of brokers in relation to the information flow and discusses their impacts on transaction costs in rural land markets. Preliminary results highlight the dominant channels in the market, i.e. informal networks with private agents involved, which support the NES position, as well as the work of a government matching scheme which reflects the NIE position. In both cases, the findings show that brokers can contribute to reducing the search and negotiation costs of land transactions through building trustworthy relationships with stakeholders.
    Keywords: Land Economics/Use
    Date: 2021–03
  8. By: Kenneth R. Ahern; Lei Kong; Xinyan Yan
    Abstract: This paper proposes a network model of the economy in which conglomerate firms transmit idiosyncratic shocks from one industry to another. The strength of inter-industry connections is determined by the conglomerate's share of total industry sales and by the industry's share of the conglomerate's total sales. The empirical results show that industry growth rates comove more strongly within industry pairs that are more closely connected in the conglomerate network. These results hold after controlling for industry-pair and year fixed effects, input-output connections, reverse causality, and in tests that exploit exogenous cross-sectional industry shocks from import tariff changes. Finally, our model also provides a new cross-industry extension for the widely-used Herfindahl index of concentration.
    JEL: E32 G32 L14
    Date: 2021–05
  9. By: Géraldine Bouveret (NTU - Nanayang Technological University - Nanayang Technological University); Antoine Mandel (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We investigate the containment of epidemic spreading in networks from a normative point of view. We consider a susceptible/infected model in which agents can invest in order to reduce the contagiousness of network links. In this setting, we study the relationships between social efficiency, individual behaviours and network structure. First, we characterise individual and socially efficient behaviour using the notions of communicability and exponential centrality. Second, we show, by computing the Price of Anarchy, that the level of inefficiency can scale up to linearly with the number of agents. Third, we prove that policies of uniform reduction of interactions satisfy some optimality conditions in a vast range of networks. In setting where no central authority can enforce such stringent policies, we consider as a type of second-best policy the implementation of cooperation frameworks that allow agents to subsidise prophylactic investments in the global rather than in the local network. We then characterise the scope for Pareto improvement opened by such policies through a notion of Price of Autarky, measuring the ratio between social welfare at a global and a local equilibrium. Overall, our results show that individual behaviours can be extremely inefficient in the face of epidemic propagation but that policy can take advantage of the network structure to design welfare improving containment policies.
    Keywords: Network,Price of Anarchy,Epidemic Spreading,Public Good
    Date: 2021–03

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