nep-net New Economics Papers
on Network Economics
Issue of 2023‒03‒06
eleven papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. The Economic Implications of a Network SIR-Macro Model of Epidemics By Keven R.A. André; Marcelo Arbex; Marcio V. Correa
  2. Monitoring network changes in social media By Chen, Cathy Yi-hsuan; Okhrin, Yarema; Wang, Tengyao
  3. Social network structure as a suicide prevention target By Cero, Ian; De Choudhury, Munmun; Wyman, Peter
  4. BANK DIVERSITY AND FINANCIAL CONTAGION By Emmanuel Caiazzo; Alberto Zazzaro
  5. Diffusion in large networks By Michel Grabisch; Agnieszka Rusinowska; Xavier Venel
  6. Product Differentiation and Oligopoly: A Network Approach By Bruno Pellegrino
  7. Estimating Time-Varying Networks for High-Dimensional Time Series By Jia Chen; Degui Li; Yuning Li; Oliver Linton
  8. The problem of sewerage networks in Bejaia (Algeria) By Taous Sahali; Abdel Majid Djenane
  9. Leveraging social comparisons: the role of peer assignment policies By Julien Senn; Jan Schmitz; Christian Zehnder
  10. From Bazooka to Backstop: The Political Economy of Standing Swap Facilities By Richtmann, Mathis L.; Steininger, Lea
  11. Efficient Estimation of Spatial Econometric Interaction Models for Sparse OD Matrices By Thomas-Agnan, Christine; Dargel, Lukas

  1. By: Keven R.A. André (CAEN - Graduate Studies in Economics, Federal University of Ceara, Brazil); Marcelo Arbex (Department of Economics, University of Windsor); Marcio V. Correa (CAEN - Graduate Studies in Economics, Federal University of Ceara, Brazil)
    Abstract: We embed social networks in a conventional SIR-Macro framework. The network effect amplifies the negative effects of an epidemic. Greater connectedness at work has a stronger recessionary effect. The average degree in the network (disease transmission technology) can be interpreted as policies such as social distance and lockdowns (mandatory face masks/vaccines).
    Keywords: Pandemic, Epidemiological model, Networks.
    JEL: D85 I10
    Date: 2023–02
  2. By: Chen, Cathy Yi-hsuan; Okhrin, Yarema; Wang, Tengyao
    Abstract: Econometricians are increasingly working with high-dimensional networks and their dynamics. Econometricians, however, are often confronted with unforeseen changes in network dynamics. In this article, we develop a method and the corresponding algorithm for monitoring changes in dynamic networks. We characterize two types of changes, edge-initiated and node-initiated, to feature the complexity of networks. The proposed approach accounts for three potential challenges in the analysis of networks. First, networks are high-dimensional objects causing the standard statistical tools to suffer from the curse of dimensionality. Second, any potential changes in social networks are likely driven by a few nodes or edges in the network. Third, in many dynamic network applications such as monitoring network connectedness or its centrality, it will be more practically applicable to detect the change in an online fashion than the offline version. The proposed detection method at each time point projects the entire network onto a low-dimensional vector by taking the sparsity into account, then sequentially detects the change by comparing consecutive estimates of the optimal projection direction. As long as the change is sizeable and persistent, the projected vectors will converge to the optimal one, leading to a jump in the sine angle distance between them. A change is therefore declared. Strong theoretical guarantees on both the false alarm rate and detection delays are derived in a sub-Gaussian setting, even under spatial and temporal dependence in the data stream. Numerical studies and an application to the social media messages network support the effectiveness of our method.
    Keywords: EP/T02772X/1
    JEL: J1
    Date: 2022–02–02
  3. By: Cero, Ian (University of Rochester Medical Center); De Choudhury, Munmun; Wyman, Peter
    Abstract: Introduction: The structure of relationships in a social network affects the suicide risk of the people embedded within it. Although current interventions often modify the social perceptions (e.g., perceived support, sense of belonging) for people at elevated risk, few seek to directly modify the structure of their surrounding social networks. We show social network structure is a worthwhile intervention target in its own right. Methods: A simple model illustrates the potential of interventions to modify social structure. The effect of these basic structural interventions on suicide risk is simulated and evaluated. Its results are briefly compared to emerging empirical findings for real network interventions. Results: Even an intentionally simplified intervention on social network structure (i.e., random addition of social connections) is likely to be both effective and safe. Specifically, this illustrative intervention had a high probability of reducing the overall suicide risk, without increasing the risk of those who were healthy at baseline. It also frequently resolved stable, high risk clusters of people at elevated risk. These illustrative results are generally consistent with emerging evidence from real social network interventions for suicide. Conclusion: Social network structure is a neglected, but valuable intervention target for suicide prevention.
    Date: 2023–01–21
  4. By: Emmanuel Caiazzo (University of Naples Federico II); Alberto Zazzaro (Department of Economics and Statistics, University of Naples Federico II, CSEF, and MoFiR)
    Abstract: This paper analyzes financial contagion in a banking system where banks are linked by interbank claims and common assets. We find that asset commonality makes banking systems more vulnerable to idiosyncratic shocks and helps to determine which interbank network structures are resistant to contagion. When the degree of commonality is homogeneous across banks, the most resilient structure is the complete interbank network in which each bank borrows evenly from all the others. However, when the bank most exposed to the defaulting bank is not the one whose portfolio is most similar to it, incomplete interbank networks are more resilient than complete. We also show that the degree and variability of asset commonality between banks and the way this intertwines with the cross-holdings of interbank deposits have important implications for macroprudential regulation.
    Keywords: Banking crisis; financial contagion; interbank network; asset commonality
    JEL: G01 G21 G28
    Date: 2023–02
  5. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - 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, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Xavier Venel (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma], PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We investigate the phenomenon of diffusion in a countably infinite society of individuals interacting with their neighbors in a network. At a given time, each individual is either active or inactive. The diffusion is driven by two characteristics: the network structure and the diffusion mechanism represented by an aggregation function. We distinguish between two diffusion mechanisms (probabilistic, deterministic) and focus on two types of aggregation functions (strict, Boolean). Under strict aggregation functions, polarization of the society cannot happen, and its state evolves towards a mixture of infinitely many active and infinitely many inactive agents, or towards a homogeneous society. Under Boolean aggregation functions, the diffusion process becomes deterministic and the contagion model of Morris (2000) becomes a particular case of our framework. Polarization can then happen. Our dynamics also allows for cycles in both cases. The network structure is not relevant for these questions, but is important for establishing irreducibility, at the price of a richness assumption: the network should contain at least one complex star and have enough space for storing local configurations. Our model can be given a game-theoretic interpretation via a local coordination game, where each player would apply a best-response strategy in a random neighborhood.
    Keywords: diffusion, countable network, aggregation function, polarization, convergence, bestresponse
    Date: 2022–06
  6. By: Bruno Pellegrino
    Abstract: This paper develops a theory of oligopoly and markups in general equilibrium. Firms compete in a network of product market rivalries that emerges endogenously out of the characteristics of the products and services they supply. My model embeds a novel, highly tractable and scalable demand system (GHL) that can be estimated for the universe of public corporations in the USA, using publicly-available data. Using the model, I compute firm-level markups and decompose them into: 1) a new measure of firm productivity that accounts for product quality; 2) a metric of network centrality, which captures the extent of competition from substitute products. I estimate that, in 2019, public corporations produced consumer surplus in excess of 10 US$ trillions (against $3 trillions of profits). Oligopoly lowers total surplus by 11.5% and depresses consumer surplus by 31%. My analysis also suggests that both numbers were significantly lower in the mid-90s (7.9% and 21.5%, respectively). These results should be interpreted with care due to data limitations.
    Keywords: competition, concentration, general equilibrium, market power, markups, mergers, monopoly, networks, oligopoly, text analysis
    JEL: D20 D40 D60 E20 L10 O40
    Date: 2023
  7. By: Jia Chen; Degui Li; Yuning Li; Oliver Linton
    Abstract: We explore time-varying networks for high-dimensional locally stationary time series, using the large VAR model framework with both the transition and (error) precision matrices evolving smoothly over time. Two types of time-varying graphs are investigated: one containing directed edges of Granger causality linkages, and the other containing undirected edges of partial correlation linkages. Under the sparse structural assumption, we propose a penalised local linear method with time-varying weighted group LASSO to jointly estimate the transition matrices and identify their significant entries, and a time-varying CLIME method to estimate the precision matrices. The estimated transition and precision matrices are then used to determine the time-varying network structures. Under some mild conditions, we derive the theoretical properties of the proposed estimates including the consistency and oracle properties. In addition, we extend the methodology and theory to cover highly-correlated large-scale time series, for which the sparsity assumption becomes invalid and we allow for common factors before estimating the factor-adjusted time-varying networks. We provide extensive simulation studies and an empirical application to a large U.S. macroeconomic dataset to illustrate the finite-sample performance of our methods.
    Date: 2023–02
  8. By: Taous Sahali (Université Abderrahmane Mira [Béjaïa]); Abdel Majid Djenane (Université Abderrahmane Mira [Béjaïa])
    Abstract: The problem of the sewerage networks in Bejaia is due to the obsolescence of the equipment and the under-dimensioning of the networks. We have carried out a small study and show using the equations where the problem lies. to do so, we collected data from the various organizations. Changing the diameter of the sewer networks can solve the problems of overflow and the waste they generate, because rainwater carries garbage and debris, which then accumulates causing stagnation of water.
    Keywords: sustainable development, water resources, water pollution, the population explosion, sewerage networks
    Date: 2022
  9. By: Julien Senn; Jan Schmitz; Christian Zehnder
    Abstract: Using a large-scale real effort experiment, we explore whether and how different peer assignment mechanisms affect worker performance and stress. Letting individuals choose whom to compare to increases productivity to the same extent as a targeted exogenous matching policy aimed at maximizing motivational spillovers. These effects are significantly larger than those obtained through random assignment and their magnitude is comparable to the impact of monetary incentives that increase pay by about 10 percent. A downside of targeted peer assignment is that, unlike endogenous peer selection, it leads to a large increase in stress. We uncover the behavioral origins of these desirable effects of peer choice using a combination of choice data, text analysis and simulations. The key advantage of letting workers choose whom to compare to is that it allows those workers who want to be motivated to compare to a motivating peer while also permitting those for whom social comparisons have little benefits or are too stressful to avoid them. Altogether, our results highlight that policies should not only be compared regarding their effects on output, but also with respect to their potential unintended consequences.
    Keywords: Social comparisons, productivity, stress, incentives, real effort
    JEL: C93 J24 M54
    Date: 2023–02
  10. By: Richtmann, Mathis L.; Steininger, Lea
    Abstract: The permanent international lender of last resort consists of a swap line network between six major central banks, centering around the US Federal Reserve. Arguably, this network is a solution to a long debated problem as it provides public emergency liquidity provision to the world's largest financial market, the Eurodollar market. Drawing on exclusive interviews with monetary technocrats as well as a textual analysis of Federal Open Market Committee meeting transcripts over the course of 14 years, we reconstruct how this facility came into being. Building on Kalyanpur (2017) and Braun (2015), we develop an interpretative framework of bricolage to set the formation into context: In times of crises, central bankers rely on retrospection, experimentation, and creative re-deployment to develop their tools. However, in non-crises times, those tools prevail which offer what we coin 'bureaucratic familiarity'.
    Keywords: Standing Swap Facilities, lender of last resort, International Monetary Policy, Central Bank Cooperation, Monetary Technocrats
    Date: 2023–02
  11. By: Thomas-Agnan, Christine; Dargel, Lukas
    Abstract: In the framework of spatial econometric interaction models for origin-destination flows, we develop an estimation method for the case when the list of origins may be distinct from the list of destinations, and when the origin-destination matrix may be sparse. The proposed model resembles a weighted version of the one of LeSage (2008) and we are able to retain most of the efficiency gains associated with the matrix form estimation, which we illustrate for the maximum likelihood estimator. We also derive computationally feasible tests for the coherence of the estimation results and present an efficient approximation of the conditional expectation of the flows, marginal effects and predictions.
    Keywords: Spatial Econometric;; Interaction Models;; Zero Flow Problem;; OD Matrices;; Networks;
    JEL: C21 C51
    Date: 2023–02–08

This nep-net issue is ©2023 by Alfonso Rosa García. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.