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on Network Economics |
| By: | Julien Fixary (UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We extend Bich-Fixary's theorem ([2]) about the topological structure of the graph of pairwise stable networks. Namely, we show that the graph of pairwise stable networks is not only homeomorphic to the space of societies, but that it is ambient isotopic to a trivial copy of this space (a result in the line of Demichelis-Germano's unknottedness theorem ([7])). Furthermore, we introduce the notion of (extended) network dynamics which refers to families of vector fields on the set of weighted networks whose zeros correspond to pairwise stable networks. We use our version of the unknottedness theorem to show that most of network dynamics can be continuously connected to each other, without adding additional zeros. Finally, we prove that this result has an important consequence on the indices of these network dynamics at any pairwise stable network, a concept that we link to genericity using Bich-Fixary's oddness theorem ([2]). |
| Keywords: | Pairwise Stability,Unknottedness Theorem,Network Dynamics,Genericity |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-03531802&r= |
| By: | Girish Bahal; Damian Lenzo |
| Abstract: | In a broad class of macroeconomic models with production networks, it is difficult to discern which set of structural relationships between sectors amplify shocks and shape aggregate outcomes. As a remedy, we provide a formula that sidesteps this issue by considering linkages in isolation, thereby quantifying the macroeconomic significance of specific intersectoral relationships. In an application, we specialize our framework to derive a closed-form expression for network spillovers in efficient economies, where network spillovers are defined as the effect of shocks on GDP due to propagation to other sectors. Empirically, we find significant fluctuations in network spillovers for 43 countries between 2000 and 2014, suggesting this channel to be a key driver of macroeconomic outcomes. In a second application, we quantify the gains of having different hypothetical input-output structures, keeping the final expenditure shares of goods and services the same. We find the United States’ growth rate would have been almost 20 percent higher per year had its input-output architecture been identical to China’s. |
| Keywords: | Production networks, Hulten’s theorem, disaggregated macroeconomic models |
| JEL: | D24 D5 D57 E23 E32 O41 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-07&r= |
| By: | Ernest Liu (Princeton University); Aleh Tsyvinski (Yale University) |
| Abstract: | We associate a dynamical system with input-output networks and study its spectral properties. Specifically, we develop a dynamic production network model featuring adjustment costs of changing inputs and thus gradual recovery from temporary TFP shocks. First, we explicitly solve for the output and welfare effects of temporary shocks. We show shocks to sectors that generate significant sales through distant linkages to the consumer are most damaging. Second, we eigendecompose the input-output matrix and show, because higher-order linkages take longer to recover, fewer eigenvectors are needed to represent the welfare impact of sectoral shocks in the dynamic economy compared to the Domar weights. Third, we analyze the U.S. input-output structure and show the welfare impact of temporary shocks has a low-dimensional, 4-factor structure (out of 171 eigenvectors). Finally, we revisit the historical use of input-output analysis in target selection or bombing Nazi Germany and Imperial Japan during WWII. |
| Keywords: | dynamical system, input-output network, |
| JEL: | E00 E23 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2021-13&r= |
| By: | Chen, Yuanyuan (Shanghai University of Finance and Economics); Feng, Shuaizhang (Shanghai University of Finance and Economics); Yang, Chao (Shanghai University of Finance and Economics) |
| Abstract: | This paper develops a model that allows for heterogenous contemporaneous peer effects among different types of agents who are endogenously selected into different peer groups. Using our framework, we characterize the reduced-form coefficient in the peer effect literature and show that it is a priori ambiguous in sign. We apply our approach to migrant and local students in Shanghai, where local students all go to public schools, but migrant students are endogenously selected into either public schools or lower-quality private schools. The results suggest large contemporaneous peer effects among all student groups. We conduct policy experiments to examine the effect of transferring migrant students from private schools to public schools. We show that peer effect can be substantially more important than the school effect in accounting for the total treatment effect of moving to better schools. |
| Keywords: | peer effects, sample selection, education, migrant children |
| JEL: | C31 C34 I21 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15070&r= |
| By: | Emanuele Citera (New School for Social Research); Shyam Gouri Suresh (Davidson College); Mark Setterfield (New School for Social Research) |
| Abstract: | We construct a model of cyclical growth with agent-based features designed to study the network origins of aggregate fluctuations from a demand-side perspective. In our model, aggregate fluctuations result from variations in investment behavior at firm level motivated by endogenously-generated changes in `animal spirits' or the state of long run expectations(SOLE). In addition to being influenced by their own economic conditions, firms pay attention to the performance of first-degree network neighbours, weighted (to differing degrees) by the centrality of these neighbours in the network, when revising their SOLE. This allows us to analyze the effects of the centrality of linked network neighbours on the amplitude of aggregate fluctuations. We show that the amplitude of fluctuations is significantly affected by the eigenvector centrality, and the weight attached to the eigenvector centrality, of linked network neighbours. The dispersion of this effect about its mean is shown to be similarly important, resulting in the possibility that network properties can result in `great moderations' giving way to sudden increases in the volatility of aggregate economic performance. |
| Keywords: | Aggregate fluctuations, cyclical growth, animal spirits, state of long run expectations, agent-based model, random network, preferential attachment, small world. |
| JEL: | C63 E12 E32 E37 O41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:72-2021&r= |
| By: | Terry Moon (University of British Columbia); David Schoenherr (Princeton University) |
| Abstract: | The misallocation of government resources to the politically connected is considered to impose substantial economic costs. We document that resource misallocation to the politically connected extends to resources allocated by private sector firms. Following the presidential election in 2007, private banks in Korea appoint executives from the new president’s alumni network in an effort to establish links to the new administration. In turn, private banks that appoint executives from the president’s alumni network allocate more credit to firms with links to the same network through their CEOs. Additionally, in-network firms pay lower interest rates and are protected from default through debt restructurings. Exploiting variation for the same firm across different lenders over time allows us to control for firm-time fixed effects, sharpening the identification of the results. We estimate that private banks incur aggregate losses equivalent to 4.5 basis points of GDP due to preferential treatment of in-network firms. |
| Keywords: | allocative efficiency, banks, networks, patronage, rent-seeking |
| JEL: | D61 D72 G21 L14 P16 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-73&r= |
| By: | Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne, 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); Antoine Mandel (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne, 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); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, 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 propose a model of the joint evolution of opinions and social relationships in a setting where social influence decays over time. The dynamics are based on bounded confidence: social connections between individuals with distant opinions are severed while new connections are formed between individuals with similar opinions. Our model naturally gives raise to strong diversity, i.e., the persistence of heterogeneous opinions in connected societies, a phenomenon that most existing models fail to capture. the intensity of social interactions is the key parameter that governs the dynamics. First, it determines the asymptotic distributionn of opinions. In particular, increasing the intensity of social interactions brings society closer to consensus. Second, it determines the risk of polariztion, which is shown to increase with the intensity of social interactions. Our results allow to frame the problem of the design of public debates in a formal setting. We hence characterize the optimal strategy for a social planner who controls the intensity of the public debate and thus faces a trade-off between the pursuit of social consensus and the risk of polarization. We also consider applications to political campaigning and show that both minority and majority candidates can have incentives to lead society towards polarization. |
| Keywords: | opinion dynamics,network formation,network fragility,polarization,institution design,political campaign |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-03531788&r= |