nep-net New Economics Papers
on Network Economics
Issue of 2023‒03‒13
three papers chosen by
Alfonso Rosa García
Universidad de Murcia

  1. Competing Social Influence in Contested Diffusion: Luther, Erasmus and the Spread of the Protestant Reformation By Sascha O. Becker; Steven Pfaff; Yuan Hsiao; Jared Rubin
  2. Endogenous Tracking: Sorting and Peer Effects By Aleksei Chernulich; Romain Gauriot; Daehong Min
  3. Executive Pay: Board Reciprocity Counts By Olivier Godechot; Joanne Horton; Yuval Millo

  1. By: Sascha O. Becker (Monash University and University of Warwick); Steven Pfaff (University of Washington); Yuan Hsiao (University of Washington); Jared Rubin (Chapman University)
    Abstract: The spread of radical institutional change does not often result from onesided pro-innovation influence; countervailing influence networks in support of the status quo can suppress adoption. We develop a model of multiple and competing network diffusion. To apply the contesteddiffusion model to real data, we look at the contest between Martin Luther and Desiderius Erasmus, the two most influential intellectuals of early 16th-century Central Europe. Whereas Luther championed a radical reform of the Western Church that broke with Rome, Erasmus opposed him, stressing the unity of the Church. In the early phase of the Reformation, these two figures utilized influence networks of followers, affecting which cities in the Holy Roman Empire adopted reform. Using newly digitalized data on both leaders’ correspondence networks, their travels, the dispersion of their followers, and parallel processes of exchange among places through trade routes, we employ econometric tests and network simulations to test our theoretical model. We find that Luther’s network is strongly associated with the spread of the Reformation and that Erasmus’s network is associated with the stifling of the Reformation. This is consistent with a “fire-fighting†mechanism of contested diffusion, whereby the countervailing force suppresses innovations only after they have begun to spread.
    Keywords: contested diffusion; multiplex networks; correspondence networks; Protestant Reformation
    JEL: D85 N33 Z12 Z13
    Date: 2023
  2. By: Aleksei Chernulich; Romain Gauriot; Daehong Min (Division of Social Science)
    Abstract: We show that, when the educational choice is costly, the motive of seeking positive peer effects can result in ability grouping. In particular, high-achieving students self-sort by choosing costly courses, which we refer to as "endogenous tracking." We demonstrate the implications of endogenous tracking using the data from French middle schools, where ability grouping officially is not allowed. Instead, students are grouped together to study all courses in the standardized curriculum based on their choices between studying Spanish or a more effort-costly German. We find that costly language choices result in groups that significantly differ in terms of academic performance. Furthermore, we exploit regional differences in the effort costs of learning German to confirm that larger costs of choosing German result in more selective endogenous tracking. Finally, we identify peer effects that, together with sorting, generate inequality in educational outcomes. Such inequality, combined with observed inequality in socioeconomic status between the formed groups, works against egalitarian educational policies. JEL Codes: H75, I21, I28, J24
    Date: 2023–01
  3. By: Olivier Godechot (CRIS - Centre de recherche sur les inégalités sociales (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, MaxPo - Max Planck Sciences Po Center on Coping with Instability in Market Societies - Max Planck Institute for the Study of Societies - Max-Planck-Gesellschaft - Sciences Po - Sciences Po); Joanne Horton (WBS - Warwick Business School - University of Warwick [Coventry]); Yuval Millo (WBS - Warwick Business School - University of Warwick [Coventry])
    Abstract: Wir untersuchen, welchen Einfluss die Netzwerke von Unternehmensvorständen zwischen 1990 und 2015 auf die Führungsgehälter von insgesamt 3.395 US-Unternehmen ausgeübt haben. Drei elementare Strukturen spiegeln die Formen des Interlocking-Netzwerks mit gruppenübergreifender Reziprozität wider: eingeschränkter Austausch, wenn zwei Führungskräfte im jeweiligen Vorstand des anderen sitzen; verzögerter Austausch, wenn Y im Vorstand von X sitzt, nachdem X sein Mandat im Vorstand von Y beendet hat; und verallgemeinerter Austausch, wenn X im Vorstand von Y sitzt, der im Vorstand von Z sitzt, der im Vorstand von X sitzt. Diese überrepräsentierten Verbindungen stehen im Zusammenhang mit höheren Führungsgehältern, aber nicht mit der Wirtschaftskraft des Unternehmens, was wir als eine Form der Rentenextraktion interpretieren. Wir verwenden den Sarbanes-Oxley Act (2002) als natürliches Experiment, um unsere Ergebnisse zu bestätigen. Seit 2004, als diese Austauschsformen eingeschränkt wurden, ist deren Auswirkung auf die Gehälter verschwunden.
    Abstract: We study the influence of the corporate board network on executive pay for 3, 395 US firms between 1990 and 2015. We identify three elementary structures through which the interlocking network reflects forms of inter-group reciprocity across firms: restricted exchange , when two executives sit on each other's respective boards; delayed exchange , when y sits on the board of x after the end of x' s mandate on the board of y ; and generalized exchange , when x sits on the board of y , who sits on the board of z , who sits on the board of x . These ties, which are overrepresented, are related to higher executive pay, but are not related to firm performance, which we interpret as a form of rent extraction. We use the Sarbanes-Oxley Act (2002) as a natural experiment to confirm our results. The impact on pay disappears after 2004, once these types of exchanges are constrained.
    Abstract: Nous étudions l'influence du réseau de relations entre les conseils d'administration sur la rémunération des dirigeants au sein de 3 395 entreprises américaines entre 1990 et 2015. Nous identifions trois structures élémentaires à travers lesquelles le réseau interentreprises capture des formes de réciprocité intergroupe : l'échange restreint, lorsque deux dirigeants siègent dans les conseils d'administration respectifs l'un de l'autre ; l'échange différé, lorsque y siège au conseil d'administration de x après la fin du mandat de x au conseil d'administration de y ; et l'échange généralisé, lorsque x siège au conseil d'administration de y , qui siège au conseil d'administration de z , qui siège au conseil d'administration de x . Ces liens, qui sont surreprésentés, sont associés à une rémunération plus élevée des dirigeants impliqués dans de tels échanges, mais ne sont pas liés à la performance de l'entreprise. Nous pouvons dès lors interpréter ce phénomène comme une forme d'extraction de rente. Nous utilisons la loi Sarbanes-Oxley (2002) comme expérience naturelle pour confirmer nos résultats. L'impact de ces échanges sur les rémunérations disparaît après 2004, une fois que ces derniers sont restreints.
    Keywords: executive pay, interlocks, social exchange, reciprocity, generalized exchange, salaire des dirigeants, échange social, réciprocité, échange généralisé
    Date: 2022

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.