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on Network Economics |
| By: | Thiemo Fetzer (University of Bonn & University of Warwick); Peter John Lambert (London School of Economics and Political Science); Bennet Feld (London School of Economics and Political Science); Prashant Garg (Imperial College Business School) |
| Abstract: | This paper leverages generative AI to build a network structure over 5, 000 product nodes, where directed edges represent input-output relationships in production. We layout a two-step `build-prune' approach using an ensemble of prompt-tuned generative AI classifications. The 'build' step provides an initial distribution of edge-predictions, the `prune' step then re-evaluates all edges. With our AI-generated Production Network (AIPNET) in toe, we document a host of shifts in the network position of products and countries during the 21st century. Finally, we study production network spillovers using the natural experiment presented by the 2017 blockade of Qatar. We find strong evidence of such spill-overs, suggestive of on-shoring of critical production. This descriptive and causal evidence demonstrates some of the many research possibilities opened up by our granular measurement of product linkages, including studies of on-shoring, industrial policy, and other recent shifts in global trade. |
| Keywords: | Supply-Chain Network Analysis, Large Language Models, On-shoring, Industrial Policy, Trade wars, Econometrics-of-LLMs |
| JEL: | F14 F23 L16 F52 O25 N74 C81 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:346 |
| By: | Ruben Enikolopov; Maria Petrova; Gianluca Russo; David Yanagizawa-Drott |
| Abstract: | We examine the long-run effect of homophily in online social networks on interpersonal interactions in local communities. We measure online homophily across counties in the US using Facebook data. For identification, we exploit a conflict between Facebook and Google over data sharing of user information during the early expansion phase of Facebook. We find evidence that homophilic connections led to increased social media usage but reduced offline socialization. This shift was accompanied by deterioration of local social cohesion, as individuals became less connected across income strata and less likely to share the same political opinions with others in their counties. |
| Keywords: | social media, networks, homophily, social capital |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11375 |
| By: | Ronak Jain; Vatsal Khandelwal |
| Abstract: | Inaccurate beliefs about social norms can reduce useful social interactions and adversely affect an individual’s ability to deal with negative shocks. We implement a randomized controlled trial with low-income workers in urban India who lack access to formal financial and healthcare support. We find that the majority of individuals underestimate their community’s willingness to engage in dialogue around financial and mental health concerns. Belief correction leads to a large increase in the demand for network-based assistance. We show that the effects are driven by a reduction in the perceived costs of violating social norms arising due to concerns around reputation and insensitivity. We structurally estimate a network diffusion model and predict that our belief correction intervention will not lead to a shift in equilibrium engagement. Consistent with this, 2 years later, we find that the average beliefs of those exposed to the intervention are significantly more optimistic but still lower than the information delivered in the experiment. We compute the strength of counterfactual interventions needed to generate a sustained effect and find that belief correction can be used to generate both the demand and funding for such policies. |
| Keywords: | Social networks; social norms; beliefs; risk sharing; Mental health |
| JEL: | C93 D83 D91 I12 I31 Z13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:csa:wpaper:2024-06 |
| By: | Guanyi Wang |
| Abstract: | Many policy problems involve designing individualized treatment allocation rules to maximize the equilibrium social welfare of interacting agents. Focusing on large-scale simultaneous decision games with strategic complementarities, we develop a method to estimate an optimal treatment allocation rule that is robust to the presence of multiple equilibria. Our approach remains agnostic about changes in the equilibrium selection mechanism under counterfactual policies, and we provide a closed-form expression for the boundary of the set-identified equilibrium outcomes. To address the incompleteness that arises when an equilibrium selection mechanism is not specified, we use the maximin welfare criterion to select a policy, and implement this policy using a greedy algorithm. We establish a performance guarantee for our method by deriving a welfare regret bound, which accounts for sampling uncertainty and the use of the greedy algorithm. We demonstrate our method with an application to the microfinance dataset of Banerjee et al. (2013). |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.20860 |
| By: | Wozniak, Abigail (Federal Reserve Bank of Minneapolis); Baker, Michael T. (U.S. Military Academy, West Point); Carter, Susan P. (U.S. Military Academy, West Point) |
| Abstract: | A large literature links marriage to later life outcomes for children and adults. Marriage has declined markedly in the U.S. over the last 50 years, particularly among individuals with less than a baccalaureate degree, yet the causes of the decline are not well understood. In this paper we provide causal evidence on one potential mechanism for the observed marriage rate patterns: peer effects. We use administrative personnel data from the U.S. Army to study how peers influence marriage decisions for junior enlisted soldiers arriving to their first assignment from 2001-2018, a setting which features substantial variation in peer group marriage rates and conditional random assignment to peer groups. We find that exposure to the 75th versus 25th percentile of our identifying variation in peer marriage rates increases the likelihood that an unmarried individual marries within two years of assignment by 1.9 percent. We show that lateral peers and near supervisors alike influence marriage decisions and we argue that our results are most consistent with conformist behavior, where peers influence marriage decisions through role-modeling and group social norms. The effect of peers is larger for men, and for Black and Hispanic men, in particular. While the effect of peers attenuates after 36 months for white and Hispanic men, effects persist and continue to grow over time for Black men, suggesting that our results are not fully explained by re-timing. We benchmark our estimates against previous research and argue that the effect of peers on individual marriage decisions is economically meaningful. |
| Keywords: | marriage formation, marriage, peer effects |
| JEL: | J12 J11 J13 D1 D91 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17443 |
| By: | Bhattacharya, Titir (University of Warwick); Chakraborty, Tanika (Indian Institute of Management Calcutta); Mukherjee, Anirban (University of Calcutta) |
| Abstract: | In response to a remarkably high out of pocket (OOP) health expenditure in India, various state and the national governments in India, tried to introduce public health insurance programs. Despite being free, the take up and utilization of these programs remain low. In this paper, we seek to explain this puzzle by studying the role of informal networks in explaining insurance-adoption behavior in the context of the Arogyasri health insurance program introduced in the erstwhile state of Andhra Pradesh between 2007 and 2008. We use household panel data from the Young Lives Survey (YLS) to empirically study how the adoption of Arogyasri among poor households respond to their membership in informal networks. In this context, we differentiate between two types of network – financial network and information network. We find that adoption and utilization are significantly higher for households with access to informal financial networks. However, adoption and utilization increases much more for households outside informal networks, after they experience health shocks. Information sharing role of informal networks do not seem to affect the decision to adopt insurance. We also provide a simple theoretical framework to discuss the potential mechanisms underlying our empirical results. |
| Date: | 2024–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:2mq5v |
| By: | von Essen, Emma (Uppsala University); Smith, Nina (Aarhus University) |
| Abstract: | The paper explores the impact of the gender composition of Boards of Directors on gender diversity and earnings gaps among executive management using administrative data on all Danish private sector firms from 1995 to 2018. We find that it is not the quantity of women directors but the quality of the women entering the board that matters in generating positive spillovers on the gender gaps within the firms. Quality is viewed as the power, conceptualized as the possible influence in the boardroom, and operationalized as the position and board experience of the directors. A way of channeling power is also through the director's networks. Powerful women directors increase spillovers, while male directors have a negative impact. However, male directors' connections to females positively decrease the gender gaps. Interestingly, the spillovers are not large enough to generate a sustained change in the gender composition of the executive board, mainly because women executives exit to a larger extent than men. |
| Keywords: | board of directors, gender diversity, spillover effects |
| JEL: | J16 M12 M51 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17401 |
| By: | Ming Li; Zhentao Shi; Yapeng Zheng |
| Abstract: | This paper studies estimation and inference in a dyadic network formation model with observed covariates, unobserved heterogeneity, and nontransferable utilities. With the presence of the high dimensional fixed effects, the maximum likelihood estimator is numerically difficult to compute and suffers from the incidental parameter bias. We propose an easy-to-compute one-step estimator for the homophily parameter of interest, which is further refined to achieve $\sqrt{N}$-consistency via split-network jackknife and efficiency by the bootstrap aggregating (bagging) technique. We establish consistency for the estimator of the fixed effects and prove asymptotic normality for the unconditional average partial effects. Simulation studies show that our method works well with finite samples, and an empirical application using the risk-sharing data from Nyakatoke highlights the importance of employing proper statistical inferential procedures. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.23852 |
| By: | Matteo Citterio; Marco D'Errico; Gabriele Visentin |
| Abstract: | We introduce a novel Dynamic Graph Neural Network (DGNN) architecture for solving conditional $m$-steps ahead forecasting problems in temporal financial networks. The proposed DGNN is validated on simulated data from a temporal financial network model capturing stylized features of Interest Rate Swaps (IRSs) transaction networks, where financial entities trade swap contracts dynamically and the network topology evolves conditionally on a reference rate. The proposed model is able to produce accurate conditional forecasts of net variation margins up to a $21$-day horizon by leveraging conditional information under pre-determined stress test scenarios. Our work shows that the network dynamics can be successfully incorporated into stress-testing practices, thus providing regulators and policymakers with a crucial tool for systemic risk monitoring. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.23275 |