|
on Network Economics |
| By: | Elliott, M.; Jackson, M. O. |
| Abstract: | We introduce a parsimonious multi-sector model of international production and use it to study the impact of a disruption in the production of some goods propagates to other goods and consumers, and how that impact depends on the goods’ positions in, and overall structure of, the production network. We show that the short-run impact of a disruption can be dramatically larger than the long-run impact. The short-run disruption depends on the value of all of the final goods whose supply chains involve a disrupted good, while by contrast the long-run disruption depends only on the cost of the disrupted goods. We use the model to show how increased complexity of supply chains leads to increased fragility in terms of the probability and expected short-run size of a disruption. We also show how decreased transportation costs can lead to increased specialization in production, lowering the chances for disruption but increasing the impact conditional upon disruption. We use the model to characterize the power that a country has over others via diversions of its production as well as quotas on imports and exports. |
| Keywords: | Supply Chains, Globalization, Fragility, Production Networks, International Trade |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2625 |
| By: | Elliott, M.; Golub, B.; Leduc, M. V. |
| Abstract: | Complex organizations accomplish tasks through many steps of collaboration among workers. Corporate culture supports collaborations by establishing norms and reducing misunderstandings. Because a strong corporate culture relies on costly, voluntary investments by many workers, we model it as an organizational public good, subject to standard free-riding problems, which become severe in large organizations. Our main finding is that voluntary contributions to culture can nevertheless be sustained, because an organization's equilibrium productivity is endogenously highly sensitive to individual contributions. However, the completion of complex tasks is then necessarily fragile to small shocks that damage the organization's culture. |
| Keywords: | Corporate Culture, Networks, Fragility |
| Date: | 2026–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2624 |
| By: | Diego Vallarino |
| Abstract: | Why do capitalist economies recurrently generate crises whose severity is disproportionate to the size of the triggering shock? This paper proposes a structural answer grounded in the evolutionary geometry of production networks. As economies evolve through specialization, integration, and competitive selection, their inter-sectoral linkages drift toward configurations of increasing geometric fragility, eventually crossing a threshold beyond which small disturbances generate disproportionately large cascades. We introduce Sandpile Economics, a formal framework that interprets macroeconomic instability as an emergent property of disequilibrium production networks. The key state variable is the Forman--Ricci curvature of the input--output graph, capturing local substitution possibilities when supply chains are disrupted. We show that when curvature falls below an endogenous threshold, the distribution of cascade sizes follows a power law with tail index $\alpha \in (1, 2)$, implying a regime of unbounded amplification. The underlying mechanism is evolutionary: specialization reduces input substitutability, pushing the economy toward criticality, while crisis episodes induce endogenous network reconfiguration and path dependence. These dynamics are inherently non-ergodic and cannot be captured by representative-agent frameworks. Empirically, using global input--output data, we document that production networks operate in persistently negative curvature regimes and that curvature robustly predicts medium-run output dynamics. A one-standard-deviation increase in curvature is associated with higher cumulative growth over three-year horizons, and curvature systematically outperforms standard network metrics in explaining cross-country differences in resilience. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.13890 |
| By: | Frank Huettner |
| Abstract: | For networks with externalities, where each component's worth may depend on the full network structure, balanced contributions and fairness lead to distinct component-efficient allocation rules. We characterize the unique component-efficient allocation rule satisfying balanced contributions -- the BCE rule. Existence is the main challenge: balanced contributions must hold on every edge, but the construction uses only spanning-tree edges. A cycle-sum identity bridges this gap by reducing balanced contributions on non-tree edges to relations in proper subnetworks. The BCE rule coincides with the Myerson value for TU games and with its generalization by Jackson--Wolinsky for network games without externalities, it recovers the externality-free value on the complete network, and -- unlike the fairness-based FCE rule -- it does not reduce to a graph-free formula applied to the graph-restricted game. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.13794 |
| By: | Hiroshi IYETOMI; Yuta ARAI; Yuichi IKEDA |
| Abstract: | The ongoing geopolitical tensions between the United States and China are reshaping global production networks, particularly in the electronics industry, where East Asia serves as a central manufacturing hub. This study empirically examines Japan's position within the evolving East Asian electronics value chain using firm-level supply chain data. We construct a global supply chain network consisting of 15, 292 nodes (firms) and 27, 751 links (transactional relationships), centered on the electronics industry along with its two closely related sectors: the automotive and aerospace-defense industries. Our findings indicate that Japan continues to occupy an important upstream position, particularly in electronic components, manufacturing equipment, and precision instruments. However, a decline in the relative market share and network centrality of Japanese firms in the mainstream semiconductor industry suggests a departure from Japan's former dominance. In contrast, we identify a distinct automotive cluster in which Japanese firms remain highly competitive. The analysis also reveals an aerospace and defense community dominated by U.S. and European firms, characterized by limited participation from Japanese firms and the potential strategic exclusion of China. Furthermore, we uncover a separate cluster linking electronics, automation, and utilities, where Japanese firms play a prominent role with a 58% share. This cluster highlights a unique structural feature of industrial organization in Japan. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26025 |
| By: | Wenqin Li; Rong Ding (NEOMA - Neoma Business School); John Ziyang Zhang (Audencia Business School) |
| Abstract: | ABSTRACT This study examines the impact of board of directors' network on corporate brownwashing, utilizing hand‐collected data from Chinese A‐share listed companies in heavily polluting industries between 2012 and 2020. The results indicate that directors' network is negatively associated with corporate brownwashing. Additionally, the effect is more pronounced when a firm (1) has more interlocked directors with overseas backgrounds and (2) has more geographically close directors. Furthermore, we find that the impact of directors' network on brownwashing is stronger for firms with a higher commitment to corporate social responsibilities and facing more intense market competition. These findings, which are robust to a set of sensitivity checks, have important implications for regulators and practitioners. |
| Keywords: | directors’ network, brownwashing, heavily polluting industries |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05576705 |
| By: | Yukiko SAITO; Xinyi TONG; Kongphop WONGKAEW |
| Abstract: | This paper examines the dynamics of the Japanese production network during the COVID-19 pandemic. We utilize a panel dataset of approximately 1.8 million firms spanning from 2015 to 2023 and document that firms largely maintained existing inter-firm relationships during the early stages of the pandemic, often before severing ties in subsequent periods. Moreover, new link formation did not recover at a commensurate pace, resulting a net contraction of the production network. Furthermore, we identify a shift in the geographical distance between transacted firms. Firms increasingly dropped local partners but added distant partners. Notably, changes in network dynamics and geographical distance were driven by firms with high ICT intensity and those located in core prefectures. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26027 |
| By: | Jose Negrete Jr; Jaime Joel Ramos |
| Abstract: | Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among assets rather than being imposed statistically. The market is modeled as a system of coupled iterated maps, where assets' return depends on its own past returns and those of related assets. Effectively modeling the influence of irrational traders whose decisions are based on the past movements of a collection of stocks. The interaction structure between stock returns is defined by a coupling matrix derived from an orthogonal transformation of a Laplacian matrix that gradually links initially isolated clusters into a fully connected network. Within this structure, stable patterns of co-movement arise and can be interpreted as financial factors. The relationship between the initial clustering and the number of observed factors is consistent with a center manifold reduction. We identify an optimal regime in which assets' variance is effectively explained by the set of factors produced by the network. Our framework offers a structural perspective based on interaction-based factor formation and dimension reduction in financial markets. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.12197 |
| By: | Christian Velasquez (Banco Central de Reserva del Perú) |
| Abstract: | This paper studies the macroeconomic implications of state and sector-specific sensitivity to weather fluctuations and interregional production networks in the United States. I build a general equilibrium model where the impact of weather fluctuations on productivity is state-sector dependent, and networks expose sectors to weather shocks from other regions through intermediate inputs. To quantify these mechanisms, I use annual data on sectoral GDP and weather by state from 1970 to 2019. My estimates show that models that do not consider these characteristics underestimate the aggregate impact of weather fluctuations by at least a factor of 3. In particular, when the whole economy faces an unexpected increase in temperature of 1 Celsius degree, the contraction in economic activity increases from -0.13 to -0.37 percent once heterogeneity is considered and -1.14 percent when networks are included. |
| Keywords: | weather fluctuations, production, climate change, networks, spatial heterogeneity, GDP |
| JEL: | E23 F18 O13 Q54 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:2025-020 |
| By: | Gaul, Johannes; Schulz, Inga |
| Abstract: | This paper examines whether multinational enterprises (MNEs) adapt to international anti-tax avoidance regulation by intensifying domestic profit shifting activities. We compile a novel dataset by mapping MNE ownership network structures that link international to sub-national tax haven subsidiaries over time. Our analyses show that tighter international rules lead more strongly affected firms to intensify their presence in sub-national tax havens, consistent with strong increases in profit tax revenues at these locations. This shift indicates that international tax policies have had bite in constraining cross-border tax avoidance. At the same time, our findings reveal MNEs' strategic flexibility and highlight domestic spillovers and local consequences of global tax reforms. |
| Keywords: | Corporate Networks, Geospatial Data, ATAD, CbCR |
| JEL: | H26 H71 K10 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:340013 |
| By: | Lea Karbevska; Liming Xu; Zehui Dai; Sara AlMahri; Alexandra Brintrup |
| Abstract: | As global political tensions rise and the anticipation of additional tariffs from the United States on international trade increases, the issues of economic independence and supply chain resilience become more prominent. The importance of supply chain resilience has been further underscored by disruptions caused by the COVID-19 pandemic and the ongoing war in Ukraine. In light of these challenges, ranging from geopolitical instability to product supply uncertainties, governments are increasingly focused on adopting new trade policies. This study explores the impact of several of these policies on the global electric vehicle (EV) supply chain network, with a particular focus on their effects on country clusters and the broader structure of international trade. Specifically, we analyse three key policies: Country Plus One, Friendshoring, and Reshoring. Our findings show that Friendshoring, contrary to expectations, leads to greater globalisation by increasing the number of supply links across friendly countries, potentially raising transaction costs. The Country Plus One policy similarly enhances network density through redundant links, while the Reshoring policy creates challenges in the EV sector due to the high number of irreplaceable products. Additionally, the effects of these policies vary across industries; for instance, mining goods being less affected in Country Plus One than the Friendshoring policy. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.11479 |
| By: | Younghoon Kim; Changryong Baek |
| Abstract: | This paper proposes a dynamic network framework for uncovering latent community paths in high-dimensional VAR-type models. By embedding a degree-corrected stochastic co-blockmodel (ScBM) into the transition matrices of VAR-type systems, we separate sending and receiving roles at the node level and summarize complex directional dependence in an interpretable low-dimensional form. Our method integrates directed spectral co-clustering with eigenvector smoothing to track how directional groups split, merge, or persist over time. This framework accommodates both periodic VAR (PVAR) models for cyclical seasonal evolution and generalized VHAR models for structural transitions across ordered dependence horizons. We establish non-asymptotic misclassification bounds for both procedures and provide supporting evidence through Monte Carlo experiments. Applications to U.S.\ nonfarm payrolls distinguish a recurrent business-centered core from more mobile, seasonally sensitive sectors. In global stock volatilities, the results reveal a compact U.S.-centered long-horizon block, a Europe-heavy developed core, and a more dynamic short-horizon reallocation of peripheral and bridge markets. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.12563 |