nep-net New Economics Papers
on Network Economics
Issue of 2023‒02‒27
fifteen papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. The Dynamics of Networks and Homophily By Matthew O. Jackson; Stephen M. Nei; Erik Snowberg; Leeat Yariv
  2. Export Entry and Network Interactions: Evidence from the Belgian Production Network By Emmanuel Dhyne; Philipp Ludwig; Hylke Vandenbussche
  3. Interbank network and banks' credit supply By Covi, Giovanni; Gu, Xian
  4. Circular Networks as Efficient Nash Equilibria: two Approaches By Juan Larrosa; Fernando Tohmé
  5. Does money strengthen our social ties? Longitudinal evidence of lottery winners By Costa-Font, Joan; Powdthavee, Nattavudh
  6. Persecution and Escape By Sascha O. Becker; Volker Lindenthal; Sharun Mukand; Fabian Waldinger
  7. The Social Construction of Ignorance: Experimental Evidence By Ivan Soraperra; Joël van der Weele; Marie Claire Villeval; Shaul Shalvi
  8. Estimating Nonlinear Network Data Models with Fixed Effects By David W. Hughes
  9. Structural Characteristics and Implications of Regional Innovation Networks By Kim, Jisoo
  10. Matching and Information Design in Marketplaces By Elliott, M.; Galeotti, A.; Koh, A.; Li, W.
  11. Efficient Pricing and Hedging of High Dimensional American Options Using Recurrent Networks By Andrew Na; Justin Wan
  12. Elite persistence in medieval Venice after the Black Death By Adelaide Baronchelli; Roberto Ricciuti; Mattia Viale
  13. Peer interactions, local markets, and wages: Evidence from Italy By Brunetti, Irene; Intraligi, Valerio; Ricci, Andrea; Vittori, Claudia
  14. Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies By Mr. Yiqun Wu; Mr. Camilo E Tovar Mora; Tianxiao Zheng
  15. Discrimination in the Formation of Academic Networks: A Field Experiment on #EconTwitter By Ajzenman, Nicolas; Ferman, Bruno; Sant’Anna, Pedro C.

  1. By: Matthew O. Jackson; Stephen M. Nei; Erik Snowberg; Leeat Yariv
    Abstract: We examine friendships and study partnerships among university students over several years. At the aggregate level, connections increase over time, but homophily on gender and ethnicity is relatively constant across time, university residences, and different network layers. At the individual level, homophilous tendencies are persistent across time and network layers. Furthermore, we see assortativity in homophilous tendencies. There is weaker, albeit significant, homophily over malleable characteristics−risk preferences, altruism, study habits, and so on. We find little evidence of assimilation over those characteristics. We also document the nuanced impact of network connections on changes in Grade Point Average.
    Keywords: homophily, social networks, dynamic networks, undergraduate education, peer effects
    JEL: D85 I21 J15 J16 Z13
    Date: 2023
  2. By: Emmanuel Dhyne (Economics and Research Department, National Bank of Belgium and University of Mons); Philipp Ludwig (Department of Economics, KU Leuven); Hylke Vandenbussche (Department of Economics, KU Leuven)
    Abstract: Low export participation of firms across countries is typically related to high entry costs allowing only the most productive firms to serve foreign markets. In this paper, we move beyond individual firm characteristics to explain export participation and investigate whether firms’ domestic network linkages can facilitate export entry. Firms receive information from business interactions with experienced exporters which lowers sunk entry costs and allows them to enter the foreign market. Using rich data of buyer-seller linkages in the Belgian production network, we find that network heterogeneity is a key determinant of the extensive margin of trade. Each additional export signal received via network linkages increases the entry probability by 0.4 – 1.6 percentage points, giving firms with suitable networks a key advantage in accessing foreign markets. The marginal impact of network effects decreases in network size which we attribute to negative assortative matching in the underlying network formation process.
    Keywords: : export, learning about demand, networks
    JEL: F14
    Date: 2023–01
  3. By: Covi, Giovanni (Bank of England); Gu, Xian (Durham University Business School)
    Abstract: This paper examines how the interbank network structure influences banks’ credit supply to the real economy. Using the dynamic UK interbank networks based on the quarterly evolutions of bilateral exposures from 2014 to 2021, we find evidence of both risk-sharing effect through the interbank core-periphery structure and liquidity-insurance effect within interbank lending communities. Core banks with high global centrality and banks in a larger community tend to lend more to non-financial firms. The effect of global centrality is still significant after controlling for the local effects including local centrality and community size. During the Covid-19 pandemic, the effect of risk sharing is mitigated whereas the effect of community lending is strengthened.
    Keywords: Interbank network; centrality; community; bank loans; Covid-19
    JEL: G20 G21 L14
    Date: 2022–11–18
  4. By: Juan Larrosa (Universidad Nacional del Sur/CONICET); Fernando Tohmé (Universidad Nacional del Sur/CONICET)
    Abstract: The present paper analyzes a network formation problem, and in particular the existence of circular networks that constitute efficient Nash equilibria. We consider two ways in which they may arise as solutions. One in the framework presented by Bala and Goyal. In it an agent receives a payoff which is increasing in the number of agents to which he is directly or indirectly connected, while it is decreasing in the number of agents to whom he is directly connected. The other approach departs from their assumptions in two crucial aspects. On one hand, we assume that connecting to an agent pays off not only for the number of connections that the agent can provide but also for her intrinsic value. On the other hand, we assume that each path connecting two agents has an associated cost which is the sum of the number of edges it includes, and which has to be paid by each agent in the path. In both approaches it is possible to obtain circular networks as efficient Nash equilibria. But, while in Bala and Goyal’s approach this is only one possibility (the other is the empty network), in our alternative approach, if the number of agents is larger than 3, it is the unique result.
    Date: 2023–02
  5. By: Costa-Font, Joan; Powdthavee, Nattavudh
    Abstract: We study the effect of lottery wins on social ties and support network in the United Kingdom. On average, we find that winning more in the lottery increases the probability of meeting friends on most days, which is consistent with the complementary effect of income on social ties. The opposite is true with regards to social ties held for more instrumental reasons such as talking to neighbours. Winning more in the lottery also lessens an individual support network consistently with a substitution for instrumental social ties. However, further robustness checks reveal that the average lottery effects are driven by the few outliers of very large wins in the sample, thus suggesting that small to medium-sized wins (below £10k) may not be enough to change people’s social ties and support network in a substantial way.
    Keywords: income; lottery; socialization effect; unearned income; friendships; neighbourhood; social ties
    JEL: Z10
    Date: 2023–02–03
  6. By: Sascha O. Becker (Monash University and University of Warwick); Volker Lindenthal (LMU Munich); Sharun Mukand (University of Warwick); Fabian Waldinger (LMU Munich)
    Abstract: We study the role of professional networks in facilitating emigration of Jewish academics dismissed from their positions by the Nazi government. We use individual-level exogenous variation in the timing of dismissals to estimate causal effects. Academics with more ties to early émigrés (emigrated 1933-1934) were more likely to emigrate. Early émigrés functioned as "bridging nodes" that facilitated emigration to their own destination. We also provide evidence of decay in social ties over time and show that professional networks transmit information that is not publicly observable. Finally, we study the relative importance of three types (family, community, professional) of social networks.
    Keywords: professional networks; high-skilled emigration; Nazi Germany; Jewish academics; universities;
    JEL: I20 I23 I28 J15 J24 N30 N34 N40 N44
    Date: 2023–01–23
  7. By: Ivan Soraperra; Joël van der Weele; Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Shaul Shalvi
    Abstract: We experimentally study the social transmission of "inconvenient" information about the externalities generated by one's own decision. In the laboratory, we pair uninformed decision makers with informed senders. Compared to a setting where subjects can choose their information directly, we find that social interactions increase selfish decisions. On the supply side, senders suppress almost 30 percent of "inconvenient" information, driven by their own preferences for information and their beliefs about the decision maker's preferences. On the demand side, about one-third of decision makers avoids senders who transmit inconvenient information ("shooting the messenger"), which leads to assortative matching between information-suppressing senders and information-avoiding decision makers. Having more control over information generates opposing effects on behavior: selfish decision makers remain ignorant more often and donate less, while altruistic decision makers seek out informative senders and give more. We discuss applications to information sharing in social networks and to organizational design.
    Keywords: Social interactions, Information avoidance, Assortative matching, Ethical behavior, Experiment
    Date: 2022
  8. By: David W. Hughes (Boston College)
    Abstract: This paper considers estimation of a directed network model in which outcomes are driven by dyad-specific variables (such as measures of homophily) as well as unobserved agent-specific parameters that capture degree heterogeneity. I develop a jackknife bias correction to deal with the incidental parameters problem that arises from fixed effect estimation of the model. In contrast to previous proposals, the jackknife approach is easily adaptable to different models and allows for non-binary outcome variables. Additionally, since the jackknife estimates all parameters in the model, including fixed effects, it allows researchers to construct estimates of average effects and counterfactual outcomes. I also show how the jackknife can be used to bias-correct fixed effect averages over functions that depend on multiple nodes, e.g. triads or tetrads in the network. As an example, I implement specification tests for dependence across dyads, such as reciprocity or transitivity. Finally, I demonstrate the usefulness of the estimator in an application to a gravity model for import/export relationships across countries.
    Date: 2021–11–08
  9. By: Kim, Jisoo (Korea Institute for Industrial Economics and Trade)
    Abstract: Since the importance of innovation as a means of industrial development and economic growth has been emphasized, the region has played a key role as an appropriate spatial unit of innovation policy and a spatial scope in which connections and exchanges between innovators are more active. However, the rapidly changing industrial environment requires to redefine the direction of regional innovation policies and rethink their design. The main purpose of this study is to derive implications for promoting interaction between innovators and suggest policy directions. For this, we identify innovation networks in each region, analyze the status and characteristics of interactions in the networks, and diagnose the structure of relationships among innovation actors.
    Keywords: innovation; regional innovation; regional networks; innovation policy; Korea; COVID-19
    JEL: O38 R58
    Date: 2021–08–01
  10. By: Elliott, M.; Galeotti, A.; Koh, A.; Li, W.
    Abstract: There are many markets that are networked in these sense that not all consumers have access to (or are aware of) all products, while, at the same time, firms have some information about consumers and can distinguish some consumers from some others (for example, in online markets through cookies). With unit demand and price-setting firms we give a complete characterization of all welfare outcomes achievable in equilibrium (for arbitrary buyer-seller networks and arbitrary information structures), as well as the designs (networks and information structures) which implement them.
    Date: 2023–02–04
  11. By: Andrew Na; Justin Wan
    Abstract: We propose a deep Recurrent neural network (RNN) framework for computing prices and deltas of American options in high dimensions. Our proposed framework uses two deep RNNs, where one network learns the price and the other learns the delta of the option for each timestep. Our proposed framework yields prices and deltas for the entire spacetime, not only at a given point (e.g. t = 0). The computational cost of the proposed approach is linear in time, which improves on the quadratic time seen for feedforward networks that price American options. The computational memory cost of our method is constant in memory, which is an improvement over the linear memory costs seen in feedforward networks. Our numerical simulations demonstrate these contributions, and show that the proposed deep RNN framework is computationally more efficient than traditional feedforward neural network frameworks in time and memory.
    Date: 2023–01
  12. By: Adelaide Baronchelli (Department of Economics (University of Verona)); Roberto Ricciuti (Department of Economics (University of Verona)); Mattia Viale (Department of Economics (University of Verona))
    Abstract: This paper studies the effect that the plague in 1348 had on the structure of power in Venice. Using data from “The Rulers of Venice, 1332-1524” dataset, we conceptualize the Venetian structure of power as a two-mode network where relevant political houses are associated with the offices their members were elected. We find that, after the shock of the Black Death, the major houses were able to cling to power and even increase their importance.
    Keywords: Political elite; Economic elite; Black Death; Venice.
    JEL: N43 C45 D71
    Date: 2023–01
  13. By: Brunetti, Irene; Intraligi, Valerio; Ricci, Andrea; Vittori, Claudia
    Abstract: This paper investigates the relationship between the spatial distribution of occupations with a high content of peer interactions and wages among Italian provinces. At this aim, we use a unique employer-employee dataset obtained by merging administrative data on wages and labor market histories of individuals, with survey data on job tasks and contents. The spatial distribution of jobs intensive in peer-interactions is further measured according to the occupational structure of Italian provinces. The econometric analysis shows that the concentration of peer interactions leads to higher wages at the province level. These results are robust to firms and workers' heterogeneity and endogeneity issues.
    Keywords: Peer interactions, Wages, Agglomeration externalities
    JEL: J31 R12 R23
    Date: 2023
  14. By: Mr. Yiqun Wu; Mr. Camilo E Tovar Mora; Tianxiao Zheng
    Abstract: We stress test the global economy to extreme climate change-related shocks on large and interconnected economies. Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies’ external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019’s global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.
    Keywords: Climate change; external financing-needs-at-risk; multilayered networks; climate change vulnerability; vulnerability to climate change; climate vulnerability; climate change risk; CDS spread; Natural disasters; Stress testing; Climate policy; Global
    Date: 2022–09–16
  15. By: Ajzenman, Nicolas (McGill University); Ferman, Bruno (Sao Paulo School of Economics); Sant’Anna, Pedro C. (Sao Paulo School of Economics)
    Abstract: This paper assesses the results of an experiment designed to identify discrimination in users' following behavior on Twitter. Specifically, we created fictitious bot accounts that resembled humans and claimed to be PhD students in economics. The accounts differed in three characteristics: gender (male or female), race (Black or White), and university affiliation (top- or lower-ranked). The bot accounts randomly followed Twitter users who form part of the #EconTwitter academic community. We measured how many follow-backs each account obtained after a given period. Twitter users from this community were 12% more likely to follow accounts of White students compared to those of Black students; 21% more likely to follow accounts of students from top-ranked, prestigious universities compared to accounts of lower-ranked institutions; and 25% more likely to follow female compared to male students. The racial gap persisted even among students from top-ranked institutions, suggesting that Twitter users racially discriminate even in the presence of a signal that could be interpreted as indicative of high academic potential. Notably, we find that Black male students from top-ranked universities receive no more follow-backs than White male students from relatively lower-ranked institutions.
    Keywords: gender, economics profession, discrimination, race, social media
    JEL: J15 J16 A11 C93 I23
    Date: 2023–01

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