nep-net New Economics Papers
on Network Economics
Issue of 2022‒03‒28
fourteen papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Collaboration in Bipartite Networks By Chih-Sheng Hsieh; Michael D König; Xiaodong Liu; Christian Zimmermann
  2. Unknottedness of the Graph of Pairwise Stable Networks & Network Dynamics By Julien Fixary
  3. Zipf's Law across social media By Michael P Cameron
  4. Score Driven Generalized Fitness Model for \\Sparse and Weighted Temporal Networks By Domenico Di Gangi; Giacomo Bormetti; Fabrizio Lillo
  5. Uniqueness of Clearing Payment Matrices in Financial Networks By Péter Csóka; P. Jean-Jacques Herings
  6. O Brother, Where Start Thou? Sibling Spillovers on College and Major Choice in Four Countries By Adam Altmejd; Andrés Barrios-Fernández; Marin Drlje; Joshua Goodman; Michael Hurwitz
  7. An Econometric Model of Network Formation with an Application to Board Interlocks between Firms By Cristina Gualdani
  8. On the design of public debate in social networks By Michel Grabisch; Antoine Mandel; Agnieszka Rusinowska
  9. A Nonparametric Dynamic Network via Multivariate Quantile Autoregressions By Zongwu Cai; Xiyuan Liu
  10. Public disclosure of tax information. Compliance tool or social network? By Daniel Reck; Joel Slemrod; Trine Vattø
  11. Systemic Risk in Financial Systems: Properties of Equilibria By John Stachurski
  12. Derivatives Risks as Costs in a One-Period Network Model By Dorinel Bastide; Stéphane Crépey; Samuel Drapeau; Mekonnen Tadese
  13. Make the Difference! computationally Trivial Estimators for Grouped Fixed Effects Models By Martin Mugnier
  14. The Emergence of Market Structure By Maryam Farboodi; Gregor Jarosch; Robert Shimer

  1. By: Chih-Sheng Hsieh (Department of Economics, National Taiwan University); Michael D König (Centre for Economic Policy Research (CEPR), London); Xiaodong Liu (Department of Economics, University of Colorado Boulder); Christian Zimmermann (Department of Economic Research, Federal Reserve Bank of St. Louis)
    Abstract: This paper studies the impact of collaboration on research output. First, we build a micro-founded model for scientific knowledge production, where collaboration between researchers is represented by a bipartite network. The Nash equilibrium of the game incorporates both the complementarity effect between collaborating researchers and the substitutability effect between concurrent projects of the same researcher. Next, we propose a Bayesian MCMC procedure to estimate the structural parameters, taking into account the endogenous participation of researchers in projects. Finally, we illustrate the empirical relevance of the model by analyzing the coauthorship network of economists registered in the RePEc Author Service. The estimated complementarity and substitutability effects are both positive and significant when the endogenous matching between researchers and projects is controlled for, and are downward biased otherwise. To show the importance of correctly estimating the structural model in policy evaluation, we conduct a counterfactual analysis of research incentives. We find that the effectiveness of research incentives tends to be understated when the complementarity effect is ignored and overstated when the substitutability effect is ignored.
    Keywords: bipartite networks, coauthorship networks, research collaboration, spillovers, economics of science
    Date: 2022–02
  2. 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
  3. By: Michael P Cameron (University of Waikato)
    Abstract: Zipf's Law describes an empirical regularity that appears across many human and physical domains, and states that ranked data exhibits a power law distribution. Although there are various extant studies illustrating power law relationships using social media data, we significantly extend these previous studies by looking at eight popular online social media networks: (1) Twitter; (2) YouTube; (3) Instagram; (4) Twitch; (5) DLive; (6) TikTok; (7) Daily Motion; and (8) Facebook. Specifically, we test whether the distribution of connections (followers, subscribers, or likes) follows a power law distribution for the top 5000 members of each social network. We find strong evidence that a power law relationship exists for every one of the social networks that we study, although this relationship breaks down for users at the top of the connections distribution. Despite the finding of a power law relationship for all of these social networks, the degree of inequality in social media connections differs substantially across the different networks, with the highest degree of inequality in DLive, and the lowest degree in TikTok and YouTube.
    Keywords: Social media;Zipf's Law;Power Law;Pareto distribution
    JEL: D85 L86
    Date: 2022–03–11
  4. By: Domenico Di Gangi; Giacomo Bormetti; Fabrizio Lillo
    Abstract: While the vast majority of the literature on models for temporal networks focuses on binary graphs, often one can associate a weight to each link. In such cases the data are better described by a weighted, or valued, network. An important well known fact is that real world weighted networks are typically sparse. We propose a novel time varying parameter model for sparse and weighted temporal networks as a combination of the fitness model, appropriately extended, and the score driven framework. We consider a zero augmented generalized linear model to handle the weights and an observation driven approach to describe time varying parameters. The result is a flexible approach where the probability of a link to exist is independent from its expected weight. This represents a crucial difference with alternative specifications proposed in the recent literature, with relevant implications for the flexibility of the model. Our approach also accommodates for the dependence of the network dynamics on external variables. We present a link forecasting analysis to data describing the overnight exposures in the Euro interbank market and investigate whether the influence of EONIA rates on the interbank network dynamics has changed over time.
    Date: 2022–02
  5. By: Péter Csóka (Department of Finance, Corvinus University of Budapest and Centre for Economic and Regional Studies); P. Jean-Jacques Herings (Department of Economics, Maastricht University)
    Abstract: We study bankruptcy problems in financial networks in the presence of general bankruptcy laws. The set of clearing payment matrices is shown to be a lattice, which guarantees the existence of a greatest and a least clearing payment. Multiplicity of clearing payment matrices is both a theoretical and a practical concern. We present a new condition for uniqueness that generalizes all the existing conditions proposed in the literature. Our condition depends on the decomposition of the financial network into strongly connected components. A strongly connected component which contains more than one agent is called a cycle and the involved agents are called cyclical agents. If there is a cycle without successors, then one of the agents in such a cycle should have a positive endowment. The division rule used by a cyclical agent with a positive endowment should be positive monotonic and the rule used by a cyclical agent with a zero endowment should be strictly monotonic. Since division rules involving priorities are not positive monotonic, uniqueness of the clearing payment matrix is a much bigger concern for such division rules than for proportional ones. We also show how uniqueness of clearing payment matrices is related to continuity of bankruptcy rules.
    Keywords: Financial networks, systemic risk, bankruptcy rules, fixed points.
    JEL: C71 G10
    Date: 2021–09
  6. By: Adam Altmejd (Stockholm University); Andrés Barrios-Fernández (MIT); Marin Drlje (CERGE-EI); Joshua Goodman (Boston University); Michael Hurwitz (College Board)
    Abstract: Family and social networks are widely believed to influence important life decisions but identifying their causal effects is notoriously difficult. Using admissions thresholds that directly affect older but not younger siblings’ college options, we present evidence from the United States, Chile, Sweden and Croatia that older siblings’ college and major choices can significantly influence their younger siblings’ college and major choices. On the extensive margin, an older sibling’s enrollment in a better college increases a younger sibling’s probability of enrolling in college at all, especially for families with low predicted probabilities of enrollment. On the intensive margin, an older sibling’s choice of college or major increases the probability that a younger sibling applies to and enrolls in that same college or major. Spillovers in major choice are stronger when older siblings enroll and succeed in more selective and higher-earning majors. The observed spillovers are not well explained by price, income, proximity or legacy effects, but are most consistent with older siblings transmitting otherwise unavailable information about the college experience and its potential returns. The importance of such personally salient information may partly explain persistent differences in college-going rates by geography, income, and other determinants of social networks.
    Keywords: Sibling Effects, College and Major Choice, Peer and Social Network Effects, United States, Chile, Sweden, Croatia
    JEL: I21 I24
    Date: 2020–05
  7. By: Cristina Gualdani (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study identification of the players' preferences in a network formation game featuring complete information, nonreciprocal links, and a spillover effect. We decompose the network formation game into local games such that the network formation game is in equilibrium if and only if each local game is in equilibrium. This decomposition helps us prove equilibrium existence, reduce the number of moment inequalities characterising the identified set, and simplify the calculation of the integrals entering those moment inequalities. The developed methodology is used to investigate Italian firms' incentives for having their executive directors sitting on competitors' boards.
    Keywords: Network formation,Board interlocks,Partial identification,Multiple equilibria
    Date: 2021–10
  8. 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
  9. By: Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA); Xiyuan Liu (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA)
    Abstract: In this article, we propose a vector autoregressive model for conditional quantiles with functional coefficients to construct a novel class of nonparametric dynamic network systems, of which the interdependences among tail risks such as Value-at-Risk are allowed to vary smoothly with a variable of general economy. Methodologically, we develop an easy-to-implement two-stage procedure to estimate functionals in the dynamic network system by the local linear smoothing technique. We establish the consistency and the asymptotic normality of the proposed estimator under strongly mixing time series settings. The simulation studies are conducted to show that our new methods work fairly well. The potential of the proposed estimation procedures is demonstrated by an empirical study of constructing and estimating a new type of nonparametric dynamic financial network.
    Keywords: Conditional quantile models; Dynamic financial network; Functional coefficient models; Nonparametric estimation; VAR modeling.
    JEL: C14 C58 C45 G32
    Date: 2020–10
  10. By: Daniel Reck; Joel Slemrod; Trine Vattø (Statistics Norway)
    Abstract: We conduct the first-ever study of actual searches done in a public tax disclosure system, analyzing about one million searches done in 2014 and 2015 in Norway. We characterize the social network these searches comprise, including its degree of homophily and reciprocation, and the demographics of targets and searchers. About one-fourth of searches occur within identifiable household and employment networks. Most searchers target people similar to themselves—homophily in network parlance—but young, low-income searchers also target older, successful people and celebrities. A causal research design based on the timing of searches relative to tax filing uncovers no evidence that, upon discovering they were targeted, targets subsequently increase their reported income. The evidence suggests that social comparisons motivate the bulk of searches rather than tax compliance. However, public disclosure may deter evasion even when compliance-motivated searches are rare in equilibrium.
    Keywords: Public disclosure; social network; tax compliance
    JEL: H26 D83 D85
    Date: 2022–03
  11. By: John Stachurski
    Abstract: Eisenberg and Noe (2001) analyze systemic risk for financial institutions linked by a network of liabilities. They show that the solution to their model is unique when the financial system is satisfies a regularity condition involving risk orbits. We show that this condition is not needed: a unique solution always exists.
    Date: 2022–02
  12. By: Dorinel Bastide (UEVE - Université d'Évry-Val-d'Essonne, Université Paris-Saclay, LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - UEVE - Université d'Évry-Val-d'Essonne - ENSIIE - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, BNP-Paribas , Stress Testing Methodologies & Models - BNP-Paribas); Stéphane Crépey (LPSM (UMR_8001) - Laboratoire de Probabilités, Statistiques et Modélisations - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique - UP - Université de Paris, UFR 929 - Sorbonne Université - UFR de Mathématiques - SU - Sorbonne Université); Samuel Drapeau (University of Shanghai [Shanghai], Shanghai Jiaotong University, SAIF - Shanghai Advanced Institute of Finance); Mekonnen Tadese (Woldia University)
    Abstract: We present a one-period XVA model encompassing bilateral and centrally cleared trading in a unified framework with explicit formulas for most quantities at hand. We illustrate possible uses of this framework for running stress test exercises on a financial network from a clearing member's perspective or for optimizing the porting of the portfolio of a defaulted clearing member.
    Date: 2022–02–11
  13. By: Martin Mugnier (Department of Economics, CREST, ENSAE, Institut Polytechnique de Paris, France)
    Abstract: Novel estimators are proposed for linear grouped fixed effects models. Rather than predicting a single grouping of units, they deliver a collection of groupings with the same flavor as the so-called LASSO regularization path. Mild conditions are found that ensure their asymptotic guarantees are the same as the so-called grouped fixed effects and post-spectral estimators (Bonhomme and Manresa, 2015; Chetverikov and Manresa, 2021). In contrast, the new estimators are computationally straigthforward and do not require prior knowledge of the number of groups. Monte Carlo simulations suggest good finite sample performance. Applying the approach to real data provides new insights on the potential network structure of the unobserved heterogeneity.
    Keywords: panel data, grouped fixed effects, time-varying unobserved heterogeneity, k-means clustering
    JEL: C14 C23 C25
    Date: 2022–03–14
  14. By: Maryam Farboodi (MIT); Gregor Jarosch (Princeton University); Robert Shimer (University of Chicago)
    Abstract: What market structure emerges when market participants can choose the rate at which they contact others? We show that traders who choose a higher contact rate emerge as intermediaries, earning profits by taking asset positions that are misaligned with their preferences. Some of them, middlemen, are in constant contact with other traders and so pass on their position immediately. As search costs vanish, traders still make dispersed investments and trade occurs in intermediation chains, so the economy does not converge to a centralized market. When search costs are a differentiable function of the contact rate, the endogenous distribution of contact rates has no mass points. When the function is weakly convex, faster traders are misaligned more frequently than slower traders. When the function is linear, the contact rate distribution has a Pareto tail with parameter 2 and middlemen emerge endogenously. These features arise not only in the (inefficient) equilibrium allocation, but also in the optimal allocation. Moreover, we show that intermediation is key to the emergence of the rest of the properties of this market structure.
    Keywords: Over-the-Counter Markets, Intermediation, Middlemen, Random Matching, Endogenous Search Intensity, Network Formation, Pareto Distribution, Welfare
    JEL: E44 G12 G20
    Date: 2020–05

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