nep-net New Economics Papers
on Network Economics
Issue of 2021‒10‒11
eight papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Trade Openness and Growth: A Network-Based Approach By Georg Duernecker; Moritz Meyer; Fernando Vega-Redondo
  2. Circles of Trust: Rival Information in Social Networks By Petra Persson ⓡ; Nikita Roketskiy ⓡ; Samuel Lee
  3. Import Competition and Firms’ Internal Networks By Jay Hyun; Ziho Park; Vladimir Smirnyagin
  4. MCMC Conditional Maximum Likelihood for the two-way fixed-effects logit By Bartolucci, Francesco; Pigini, Claudia; Valentini, Francesco
  5. Personal network and consumer mobility: the key role of the visitor friends and relatives on the consumption behavior of the visited member By Monica Scarano; Oliviane Brodin
  6. Truly Costly Search and Word-of-Mouth Communication By Atabek Atayev
  7. Universal Database for Economic Complexity By Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero
  8. The Heterogeneous Impact of Referrals on Labor Market Outcomes By Benjamin Lester; David A. Rivers; Giorgio Topa

  1. By: Georg Duernecker; Moritz Meyer; Fernando Vega-Redondo
    Abstract: In this paper, we propose a novel approach to the study of international trade that leads to a measure of country openness that is quite different from the various alternatives proposed by the received literature. In contrast to these, our measure does not use indicators of aggregate trade intensity, trade policy, or trade restrictiveness but relies on a broad systemic viewpoint on the effects of trade. More specifically, it goes beyond direct trade connections and measures a country’s level of integration in the world economy through the full architecture of its second, third, and all other higher-order connections in the world trade network. We apply our methodology to a sample of 204 countries spanning the period from 1962 to 2016 and perform a Bayesian analysis of model selection to identify the most important correlates of growth. The analysis finds that there is a sizable and significant positive relationship between our integration measure and a country’s rate of growth, while that of the aforementioned traditional measures of outward orientation is only minor and statistically insignificant. We perform several sensitivity checks and conclude that our baseline findings are very robust to either different data sets or alternative variations of the integration measure. Overall, this suggests that a network-based approach to measuring country openness may provide a valuable perspective on economic growth.
    Keywords: globalization, trade integration, economic growth, network analysis, dynamic panel model, Bayesian model averaging
    Date: 2021
  2. By: Petra Persson ⓡ; Nikita Roketskiy ⓡ; Samuel Lee
    Abstract: We analyze the diffusion of rival information in a social network. In our model, rational agents can share information sequentially, unconstrained by an exogenous protocol or timing. We show how to compute the set of eventually informed agents for any network, and show that it is essentially unique under altruistic preferences. The relationship between network structure and information diffusion is complex because the former shapes both the charity and confidentiality of potential senders and receivers.
    JEL: D83 D85
    Date: 2021–10
  3. By: Jay Hyun; Ziho Park; Vladimir Smirnyagin
    Abstract: Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China (“China shock”) through firms’ internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms’ internal networks has a sizable impact on industry-level employment dynamics.
    Keywords: China shock, import competition, multisector firms, multiproduct firms, network propagation, trade
    JEL: D22 F14 F40
    Date: 2021–09
  4. By: Bartolucci, Francesco; Pigini, Claudia; Valentini, Francesco
    Abstract: We propose a Markov chain Monte Carlo Conditional Maximum Likelihood (MCMC-CML) estimator for two-way fixed-effects logit models for dyadic data. The proposed MCMC approach, based on a Metropolis algorithm, allows us to overcome the computational issues of evaluating the probability of the outcome conditional on nodes in and out degrees, which are sufficient statistics for the incidental parameters. Under mild regularity conditions, the MCMC-CML estimator converges to the exact CML one and is asymptotically normal. Moreover, it is more efficient than the existing pairwise CML estimator. We study the finite sample properties of the proposed approach by means of a simulation study and three empirical applications, where we also show that the MCMC-CML estimator can be applied to binary logit models for panel data with both subject and time fixed effects. Results confirm the expected theoretical advantage of the proposed approach, especially with small and sparse networks or with rare events in panel data.
    Keywords: Directed network, Fixed effects, Link formation, Metropolis algorithm, Panel data
    JEL: C23 C25 C63
    Date: 2021–10–06
  5. By: Monica Scarano (RIME-Lab - Recherche Interdisciplinaire en Management et Économie Lab - ULR 7396 - UA - Université d'Artois - Université de Lille); Oliviane Brodin (RIME-Lab - Recherche Interdisciplinaire en Management et Économie Lab - ULR 7396 - UA - Université d'Artois - Université de Lille)
    Abstract: The literature highlights that consumer mobility is a key theme in the research field related to consumer behavior. Accordingly, behavior investigated often depends on the place of destination, which is generally conceived as a new context for social relations and consumer culture. However, mobility can also occurs in places where personal ties exist, as in the case of Visit Friends and Relatives (VFR) travelers, who intermittently visit members of their geographically dispersed personal network. Researches on consumer behavior during the visit of relatives and friends are often focused on host members. Alternatively, by focusing on the experience of visiting members who periodically move towards places where they have social relationships, we investigate how vising members influence the visited member's consumer behavior. Semi-structured interviews reveal that the visiting member may significantly affect the consumption behavior of visited members. These results present both opportunities and risks for companies.
    Abstract: La littérature présente la mobilité du consommateur comme étant un thème clé dans la recherche en comportement des consommateurs. Le comportement étudié l'est souvent par rapport au lieu de destination, qui est généralement conçu comme un nouveau contexte pour les relations sociales et la culture de consommation. Cependant, la mobilité peut aussi se situer dans des localités où il existe déjà des liens personnels, comme c'est le cas pour les voyageurs de visite de la famille et des amis, qui visitent de manière intermittente les membres de leur réseau personnel géographiquement dispersé. Les recherches sur le comportement de consommation lors des visites de la famille et des amis sont souvent focalisées sur les membres hôtes. Nous nous concentrons sur l'expérience des membres visiteurs qui voyagent périodiquement dans des endroits où ils ont des relations sociales, pour investiguer comment les membres visiteurs influencent le comportement de consommation du membre visité. Des entretiens semi-structurés révèlent que le membre voyageur peut être un agent de changement pour le comportement de consommation du membre visité. Ces résultats présentent à la fois des opportunités et des risques pour les entreprises.
    Keywords: consumer behavior,personal network,consumer mobility,visitor/visited,comportement du consommateur,réseau personnel,mobilité du consommateur,visiteur/visité
    Date: 2020–01–16
  6. By: Atabek Atayev
    Abstract: In markets with search frictions, consumers can acquire information about goods either through costly search or from friends via word-of-mouth (WOM) communication. How do sellers' market power react to a very large increase in the number of consumers' friends with whom they engage in WOM? The answer to the question depends on whether consumers are freely endowed with price information. If acquiring price quotes is costly, equilibrium prices are dispersed and the expected price is higher than the marginal cost of production. This implies that firms retain market power even if price information is disseminated among a very large number of consumers due to technological progress, such as social networking websites.
    Date: 2021–09
  7. By: Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero
    Abstract: We present an integrated database suitable for the investigations of the Economic development of countries by using the Economic Fitness and Complexity framework. Firstly, we implement machine learning techniques to reconstruct the database of Trade of Services and we integrate it with the database of the Trade of the physical Goods, generating a complete view of the International Trade and denoted the Universal database. Using this data, we derive a statistically significant network of interaction of the Economic activities, where preferred paths of development and clusters of High-Tech industries naturally emerge. Finally, we compute the Economic Fitness, an algorithmic assessment of the competitiveness of countries, removing the unexpected misbehaviour of Economies under-represented by the sole consideration of the Trade of the physical Goods.
    Date: 2021–10
  8. By: Benjamin Lester; David A. Rivers; Giorgio Topa
    Abstract: We document a new set of facts regarding the impact of referrals on labor market outcomes. Our results highlight the importance of distinguishing between different types of referrals—those from family and friends and those from business contacts—and different occupations. Then we develop an on-the-job search model that incorporates referrals and calibrate the model to key moments in the data. The calibrated model yields new insights into the roles played by different types of referrals in the match formation process, and provides quantitative estimates of the effects of referrals on employment, earnings, output, and inequality.
    Keywords: labor markets; referrals; networks; search theory; asymmetric information
    JEL: E42 E43 E44 E52 E58
    Date: 2021–10–01

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