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on Network Economics |
| By: | Zoltan Elekes; Gergo Toth; Rikard Eriksson |
| Abstract: | This paper explores how the network structure of local inter-industry labour flows relates to regional economic resilience across 72 local labour markets in Sweden. Drawing on recent advancements in network science we stress-test these networks against the sequential elimination of their nodes, finding substantial heterogeneity in network robustness across regions. Regression analysis with LASSO selection in the context of the 2008 crisis indicates that labour flow network robustness is a prominent structural predictor of employment change during crisis. These findings elaborate on how variation in the self-organisation of regional economies as complex systems makes for more or less resilient regions. |
| Keywords: | local capability base; inter-industry labour flows; skill-relatedness; network robustness; regional economic resilience; regional employment |
| JEL: | J21 L14 R11 R23 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2311&r=net |
| By: | Promit K. Chaudhuri; Sudipta Sarangi; Hector Tzavellas |
| Abstract: | We consider an incomplete information network game in which agents' information is restricted only to the identity of their immediate neighbors. Agents form beliefs about the adjacency pattern of others and play a linear-quadratic effort game to maximize interim payoffs. We establish the existence and uniqueness of Bayesian-Nash equilibria in pure strategies. In this equilibrium agents use local information, i.e., knowledge of their direct connections to make inferences about the complementarity strength of their actions with those of other agents which is given by their updated beliefs regarding the number of walks they have in the network. Our model clearly demonstrates how asymmetric information based on network position and the identity of agents affect strategic behavior in such network games. We also characterize agent behavior in equilibria under different forms of ex-ante prior beliefs such as uniform priors over the set of all networks, Erdos-Reyni network generation, and homophilic linkage. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.03124&r=net |
| By: | Edoardo Gallo; Joseph Lee; Yohanes Eko Riyanto; Erwin Wong |
| Abstract: | Social networks can sustain cooperation by amplifying the consequences of a single defection through a cascade of relationship losses. Building on Jackson et al. (2012), we introduce a novel robustness notion to characterize low cognitive complexity (LCC) networks - a subset of equilibrium networks that imposes a minimal cognitive burden to calculate and comprehend the consequences of defection. We test our theory in a laboratory experiment and find that cooperation is higher in equilibrium than in non-equilibrium networks. Within equilibrium networks, LCC networks exhibit higher levels of cooperation than non-LCC networks. Learning is essential for the emergence of equilibrium play. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.01209&r=net |
| By: | Alessandro Nicita |
| Abstract: | This paper explores the development of international supply networks in four manufacturing sectors: communication equipment, electrical machinery, motor vehicles, textiles and apparel. The study investigates changes in the trade of intermediate products using descriptive statistics, network metrics and visualization, and econometric methods. The findings of the paper suggest that the evolution of international supply networks towards far-shoring has stagnated since 2015. The paper also reveals some evidence of nearshoring and friend-shoring trends in most recent trade statistics. Developed countries and East Asian economies continue to dominate supply networks, while Latin American and African nations are largely absent. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unc:wpaper:3&r=net |
| By: | de Vos, Wout (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Hamers, Herbert (Tilburg University, Center For Economic Research) |
| Keywords: | Opinion dynamics; networks; influence; targeting; Nash equilibria |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:6d555d3d-5f45-42e7-8b71-c96026f17bdc&r=net |
| By: | Zlata Tabachov\'a; Christian Diem; Andr\'as Borsos; Csaba Burger; Stefan Thurner |
| Abstract: | Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from the real economy, supply chains in particular. Recent pandemics, geopolitical instabilities, and natural disasters demonstrated that supply chain shocks do contribute to large financial losses. Based on a unique nation-wide micro-dataset, containing practically all supply chain relations of all Hungarian firms, together with their bank loans, we estimate how firm-failures affect the supply chain network, leading to potentially additional firm defaults and additional financial losses. Within a multi-layer network framework we define a financial systemic risk index (FSRI) for every firm, quantifying these expected financial losses caused by its own- and all the secondary defaulting loans caused by supply chain network (SCN) shock propagation. We find a small fraction of firms carrying substantial financial systemic risk, affecting up to 16% of the banking system's overall equity. These losses are predominantly caused by SCN contagion. For every bank we calculate the expected loss (EL), value at risk (VaR) and expected shortfall (ES), with and without accounting for SCN contagion. We find that SCN contagion amplifies the EL, VaR, and ES by a factor of 4.3, 4.5, and 3.2, respectively. These findings indicate that for a more complete picture of financial stability and realistic credit risk assessment, SCN contagion needs to be considered. This newly quantified contagion channel is of potential relevance for regulators' future systemic risk assessments. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.04865&r=net |
| By: | Andrew Na; Meixin Zhang; Justin Wan |
| Abstract: | In this paper, we propose a generative adversarial network (GAN) approach for efficiently computing volatility surfaces. The idea is to make use of the special GAN neural architecture so that on one hand, we can learn volatility surfaces from training data and on the other hand, enforce no-arbitrage conditions. In particular, the generator network is assisted in training by a discriminator that evaluates whether the generated volatility matches the target distribution. Meanwhile, our framework trains the GAN network to satisfy the no-arbitrage constraints by introducing penalties as regularization terms. The proposed GAN model allows the use of shallow networks which results in much less computational costs. In our experiments, we demonstrate the performance of the proposed method by comparing with the state-of-the-art methods for computing implied and local volatility surfaces. We show that our GAN model can outperform artificial neural network (ANN) approaches in terms of accuracy and computational time. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.13128&r=net |
| By: | Nicola Cetorelli; Mattia Landoni; Lina Lu |
| Abstract: | Banks carry significant exposures to nonbanks from direct dealings, but they can also be exposed, indirectly, through losses in asset values resulting from fire-sale events. We assess the vulnerability of U.S. banks to fire sales potentially originating from any of twelve separate nonbank segments and identify network-like externalities driven by the interconnectedness across nonbank types in terms of asset holdings. We document that such network externalities can contribute to very large multiples of an original fire sale, thus suggesting that conventional assessments of fire-sale vulnerabilities can be grossly understated and highlighting the value of treating nonbank financial institutions as one organic whole for monitoring purposes. |
| Keywords: | fire sales; externalities; network; financial stability; nonbanks; monitoring |
| JEL: | G21 G23 |
| Date: | 2023–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:95843&r=net |
| By: | Taipov Mikhail (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | Net Neutrality imposes many restrictions on the work of Internet service providers, which can significantly affect their profits and the welfare of other economic agents in the ISP market. This article analyzes the following rules established by the Net Neutrality: “zero price” rule and the prohibition of exclusive deals between ISPs and content providers. To study the implications of Net Neutrality, a game-theoretic model of the ISP market is being created, the unique feature of which is that content providers are divided into two following types: one large content provider that creates a large cross-network effect for consumers and is able to strike exclusive deals with ISPs in the absence of Net Neutrality; and many small content providers that create a small crossnetwork effect and aren’t able to influence the prices set by ISPs. This model allowed me to draw the following conclusions about the effects of Net Neutrality: Net Neutrality increases the profits of Internet service providers and reduces the profits of a large content provider; increases the total social welfare if a large content provider joins both ISPs in the absence of Net Neutrality. The impact of net neutrality on consumer surplus and profits of small content providers depends on the exclusivity of a large content provider in the absence of net neutrality. |
| Keywords: | net Neutrality, content providers, exclusivity, platforms, social welfare |
| JEL: | C65 C79 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0054&r=net |
| By: | Henry Wai-chung; ; |
| Abstract: | This paper builds common grounds for a future research agenda in the regional studies of evolutionary economic geography and global production networks. I put forward two “troubling themes†of (geo)politics and heightened risks as the most disruptive forces in today’s increasingly fragmented global economy and argue for their significance in regional studies throughout the post-pandemic 2020s. Massive global change through the reconfiguration of and strategic (de/re)coupling with global production networks will engender new path formation in regional transformation. In this analytical move from the global “back again†to the regional, there are common questions on epistemology (causal explanations) and substantive issues (network/regional resilience; institutions/the state; inequalities/uneven development; new forms of regional policies) for both communities of researchers. |
| Keywords: | evolutionary economic geography; global production networks; geopolitics; risks; regional economies; research agenda |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2312&r=net |