nep-net New Economics Papers
on Network Economics
Issue of 2021‒06‒21
fourteen papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Misinformation: Strategic Sharing, Homophily, and Endogenous Echo Chambers By Daron Acemoglu; Asuman Ozdaglar; James Siderius
  2. Clustering Coefficients in Weighted Undirected Multilayer Networks By Paolo Bartesaghi; Gian Paolo Clemente; Rosanna Grassi
  3. Optimal Monetary Policy in Production Networks By La'O, Jennifer; Tahbaz-Salehi, Alireza
  4. An Information Filtering approach to stress testing: an application to FTSE markets By Isobel Seabrook; Fabio Caccioli; Tomaso Aste
  5. Broker Network Connectivity and the Cross-Section of Expected Stock Returns By Murat Tiniç; Ahmet Sensoy; Muge Demir; Duc Khuong Nguyen
  6. Exchange rate shocks in multicurrency interbank markets By Pierre L. Siklos; Martin Stefan
  7. Informative Social Interactions By Arrondel, Luc; Calvo Pardo, Hector F.; Giannitsarou, Chryssi; Haliassos, Michael
  8. Optimal Lockdown in a Commuting Network By Fajgelbaum, Pablo; Khandelwal, Amit; Kim, Wookun; Mantovani, Cristiano; Schaal, Edouard
  9. What does Network Analysis teach us about International Environmental Cooperation? By Stefano Carattini; Sam Fankhauser; Jianjian Gao; Caterina Gennaioli; Pietro Panzarasa
  10. A Simple Model of Buyer-Seller Networks in International Trade By Philipp Herkenhoff; Sebastian Krautheim; Philip Sauré
  11. Does Peer Motivation Impact Educational Investments? Evidence From DACA By Briana Ballis
  12. Conformism, Social Segregation and Cultural Assimilation By Francesco Flaviano Russo
  13. Exploring economic support networks amidst racial inequality in Namibia By Annalena Oppel
  14. Women in research in economics in Uruguay By Verónica Amarante; Marisa Bucheli; María Inés Moraes; Tatiana Pérez

  1. By: Daron Acemoglu; Asuman Ozdaglar; James Siderius
    Abstract: We present a model of online content sharing where agents sequentially observe an article and must decide whether to share it with others. The article may contain misinformation, but at a cost, agents can fact-check it to determine whether its content is entirely accurate. While agents derive value from future shares, they simultaneously fear getting caught sharing misinformation. With little homophily in the “sharing network”, misinformation is often quickly identified and brought to an end. However, when homophily is strong, so that agents anticipate that only those with similar beliefs will view the article, misinformation spreads more rapidly because of echo chambers. We show that a social media platform that wishes to maximize content engagement will propagate extreme articles amongst the most extremist users, while not showing these articles to ideologically opposed users. This creates an endogenous echo chamber—filter bubble—that makes misinformation spread virally. We use this framework to understand how regulation can encourage more fact-checking by online users and mitigate the consequences of filter bubbles.
    JEL: D83 D85 P16
    Date: 2021–06
  2. By: Paolo Bartesaghi; Gian Paolo Clemente; Rosanna Grassi
    Abstract: Complex systems in the real world are frequently characterized by entities connected by relationships of different nature. These systems can be appropriately described by multilayer networks where the different relations between nodes can be conveniently expressed structuring the network through different layers. To extend in a multilayer context the classical network indicators proposed for monolayer networks is an important issue. In this work we study the incidence of triangular patterns expressed through the local clustering coefficient in a weighted undirected multilayer network. We provide new local clustering coefficients for multilayer networks, looking at the network from different perspectives depending on the node's position, as well as a global clustering coefficient for the whole network. We also prove that all the well-known expressions for clustering coefficients existing in the literature, suitably extended to the multilayer framework, may be unified into our proposal, both in terms of tensors and supradjacency matrix. To show the effectiveness of the proposed measures, we study an application to the multilayer temporal financial network based on the returns of the S&P100 assets.
    Date: 2021–05
  3. By: La'O, Jennifer; Tahbaz-Salehi, Alireza
    Abstract: This paper studies the optimal conduct of monetary policy in a multi-sector economy in which firms buy and sell intermediate goods over a production network. We first provide a necessary and sufficient condition for the monetary policy's ability to implement flexible-price equilibria in the presence of nominal rigidities and show that, generically, no monetary policy can implement the first-best allocation. We then characterize the constrained-efficient policy in terms of the economy's production network and the extent and nature of nominal rigidities. Our characterization result yields general principles for the optimal conduct of monetary policy in the presence of input-output linkages: it establishes that optimal policy stabilizes a price index with higher weights assigned to larger, stickier, and more upstream industries, as well as industries with less sticky upstream suppliers but stickier downstream customers. In a calibrated version of the model, we find that implementing the optimal policy can result in quantitatively meaningful welfare gains.
    Keywords: Misallocation; nominal rigidities; Optimal monetary policy; production networks
    JEL: D57 E52
    Date: 2020–06
  4. By: Isobel Seabrook; Fabio Caccioli; Tomaso Aste
    Abstract: We present a novel methodology to quantify the "impact" of and "response" to market shocks. We apply shocks to a group of stocks in a part of the market, and we quantify the effects in terms of average losses on another part of the market using a sparse probabilistic elliptical model for the multivariate return distribution of the whole market. Sparsity is introduced with an $L_0$-norm regularization, which forces to zero some elements of the inverse covariance according to a dependency structure inferred from an information filtering network. Our study concerns the FTSE 100 and 250 markets and analyzes impact and response to shocks both applied to and received from individual stocks and group of stocks. We observe that the shock pattern is related to the structure of the network associated with the sparse structure of the inverse covariance of stock returns. Central sectors appear more likely to be affected by shocks, and stocks with a large level of underlying diversification have a larger impact on the rest of the market when experiencing shocks. By analyzing the system during times of crisis and comparative market calmness, we observe changes in the shock patterns with a convergent behavior in times of crisis.
    Date: 2021–06
  5. By: Murat Tiniç; Ahmet Sensoy; Muge Demir; Duc Khuong Nguyen
    Abstract: We examine the relationship between broker network connectivity and stock returns in an order-driven market. Considering all stocks traded in Borsa Istanbul between January 2006 and November 2015, we estimate the monthly density, reciprocity and average weighted clustering coe!cient as proxies for the broker network connectivity. Our firm-level cross-sectional regressions indicate a negative and significant predictive relationship between connectivity and one-month ahead stock returns. Our analyses also show that stocks in the lowest connectivity quintile earn 1.1% - 1.8% monthly return premiums. The connectivity premium is stronger in terms of both economic and statistical significance for small size stocks.
    Keywords: Stock market; trading networks; broker networks, network connectivity, pricing factors
    JEL: G11 G12 G14 G24
    Date: 2021–01–01
  6. By: Pierre L. Siklos; Martin Stefan
    Abstract: We simulate the impact on the nonbank liabilities of banks in a multiplex interbank environment arising from changes in currency exposure. Currency shocks as a source of financial contagion in the banking sector have not, so far, been considered. Our model considers two sources of contagion: shocks to nonbank assets and exchange rate shocks. Interbank loans can mature at different times. We demonstrate that a dominant currency can be a significant source of financial contagion. We also find evidence of asymmetries in losses stemming from large currency depreciations versus appreciations. A variety of scenarios are considered allowing for differences in the sparsity of the banking network, the relative size and number of banks, changes in nonbank assets and equity, the possibility of bank breakups, and the dominance of a particular currency. Policy implications are also drawn.
    Keywords: Systemic risk, financial contagion, interbank markets, multilayer networks
    Date: 2021–05
  7. By: Arrondel, Luc; Calvo Pardo, Hector F.; Giannitsarou, Chryssi; Haliassos, Michael
    Abstract: Household finances are confidential and discussions are limited to a subset of peers. We collect representative survey data to examine whether interactions with inner and outer social circles influence return perceptions, expectations, and exposure to a widely known financial instrument in a developed economy with multiple information sources. Findings support the relevance of a small "financial circle". Perceived prevalence of information or participation in the financial circle improves expectation accuracy by improving accuracy of perceived past returns, and influences stock participation and exposure beyond expectations. Imitation of the outer circle, if present, is not based on return perceptions or expectations.
    Keywords: household portfolio choice; Information networks; peer effects; Social interactions; subjective expectations
    JEL: D12 D83 D84 G11 G5
    Date: 2020–06
  8. By: Fajgelbaum, Pablo; Khandelwal, Amit; Kim, Wookun; Mantovani, Cristiano; Schaal, Edouard
    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: commuting; COVID-19; General Equilibrium; lockdown; optimal policy
    JEL: C6 R38 R4
    Date: 2020–06
  9. By: Stefano Carattini; Sam Fankhauser; Jianjian Gao; Caterina Gennaioli; Pietro Panzarasa
    Abstract: Over the past 70 years, the number of international environmental agreements (IEAs) has increased substantially, highlighting their prominent role in environmental governance. This paper applies the toolkit of network analysis to identify the network properties of international environmental cooperation based on 546 IEAs signed between 1948 and 2015. We identify four stylised facts that offer topological corroboration for some key themes in the IEA literature. First, we find that a statistically significant cooperation network did not emerge until early 1970, but since then the network has grown continuously in strength, resulting in higher connectivity and intensity of cooperation between signatory countries. Second, over time the network has become closer, denser and more cohesive, allowing more effective policy coordination and knowledge diffusion. Third, the network, while global, has a noticeable European imprint: initially the United Kingdom and more recently France and Germany have been the most strategic players to broker environmental cooperation. Fourth, international environmental coordination started with the management of fisheries and the sea, but is now most intense on waste and hazardous substances. The network of air and atmosphere treaties is weaker on a number of metrics and lacks the hierarchical structure found in other networks. It is the only network whose topological properties are shaped significantly by UN-sponsored treaties.
    Date: 2021–06
  10. By: Philipp Herkenhoff; Sebastian Krautheim; Philip Sauré
    Abstract: The recent literature on firm-to-firm trade has documented salient empirical regularities of the buyer-seller network. We propose a simplistic re-interpretation of the classical Krugman (1980) model that accounts for surprisingly many of the empirical regularities. This re-interpretation relies on randomized bundling of Krugman-varieties into heterogeneous firms, economically neutral “sales units” that import foreign varieties but belong to local firms, and a statistical reporting threshold that applies to firm-to-firm transactions. We argue that our model provides an important benchmark for the assessment of theoretical models that aim to identify the determinants of firm-to-firm networks in international trade.
    Keywords: firm-to-firm, buyer-seller, trade, network, random matching
    JEL: F10 F12 F14
    Date: 2021
  11. By: Briana Ballis (University of California, Merced)
    Abstract: Despite the significant influence that peer motivation is likely to have on educational investments during high school, it is difficult to test empirically since exogenous changes in peer motivation are rarely observed. In this paper, I focus on the 2012 introduction of Deferred Action for Childhood Arrivals (DACA) to study a setting in which peer motivation changed sharply for a subset of high school students. DACA significantly increased the returns to schooling for undocumented youth, while leaving the returns for their peers unchanged. I find that DACA induced undocumented youth to invest more in their education, which also had positive spillover effects on ineligible students (those born in the US) who attended high school with high concentrations of DACA-eligible youth.
    Keywords: high school, DACA, Deferred Action for Childhood Arrivals, undocumented youth, Spillover effects
    JEL: I26 H52 J15
    Date: 2021–06
  12. By: Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: I develop and calibrate a model for the joint determination of cultural assimilation and social segregation of a minority. Culture evolves as a consequence of a disutility from non-conformism in social matchings, while social networks form endogenously as a result of exclusion of individuals with different beliefs and norms of behavior. The model delivers idiosyncratic assimilation patterns and the persistence of some cultural traits. I propose two measures of cultural assimilation, one for spatial comparisons and a second to assess assimilation over time. The model implies that cultural assimilation is weaker in pluralistic and denser societies, and it is not influenced by the minority share. Social segregation increases with social density and with the minority share, and it is higher for culturally more distant minorities. I compute both assimilation measures for a cross-section of European countries and show that the model is able to match the empirical evidence on assimilation.
    Keywords: Culture, Distance, Evolution.
    JEL: J15 Z10
    Date: 2021–06–08
  13. By: Annalena Oppel
    Abstract: Community or interpersonal support as a critical source of livelihood sustenance in the Global South can exhibit unequal dynamics. An understanding of these practices is primarily tied to the conceptual space of poverty or small communities. Less is known about how social support systems might respond to structural inequalities. I address this by exploring how support practices might be shaped by inequalities in the Namibian context.
    Keywords: Inequality, Race, Social networks, Africa, Namibia
    Date: 2021
  14. By: Verónica Amarante (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Marisa Bucheli (Universidad de la República (Uruguay). Facultad de Ciencias Sociales. Departamento de Economía); María Inés Moraes (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Tatiana Pérez (Universidad de la República (Uruguay). Facultad de Ciencias Sociales. Departamento de Economía)
    Abstract: We analyze gender gaps in written production in Economics in Uruguay. We first describe the evolution of professional context and female participation. We then provide an empirical analysis of the research output based on two databases: working papers and technical documents and articles published in journals. The main results are: a) men produce more journal articles than women but there is not a gender gap in working papers; b) women and men are unevenly represented across fields; c) non-local partnership is more likely among men than women; d) non-local partnership is strongly associated with the gender gap in journal articles production.
    Keywords: gender gaps; economic research; networks; men and women economists
    JEL: J16 J44 I23 O30
    Date: 2021–01

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