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on Network Economics |
| By: | Yves Zenou |
| Abstract: | This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first examine the main identification challenges in linear-in-means models-reflection, correlated effects, and sorting-and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers' shocks, random assignment, and exogenous variation in network links. The analysis then develops the microfoundations of peer effects through linear-quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Using this framework, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdependent layers. |
| Keywords: | Social interactions; Identification; Network games; Centrality; Multiplex networks; Non-linearities. |
| JEL: | A14 C57 D85 Z13 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:25118 |
| By: | Arthur Campbell; C. Matthew Leister; Philip Ushchev; Yves Zenou |
| Abstract: | We develop a simple model of content filtering-the tendency of individuals to selectively forward information that aligns with their ideological preference-to study how network structure shapes the distribution of political content. In our framework, individuals and content are horizontally differentiated into three types (left, middle, right). We show that content filtering can amplify the middle or the extremes and may result in only centrist content (full moderation) or only extreme content (full polarization). The outcome depends on the interaction between two forces: a preference advantage from the relative prevalence of types in the population, and a pairwise comparison advantage that systematically favors centrist content. Network density plays a critical role. Sparse networks robustly yield moderation, even when extreme types dominate the population, while dense networks replicate the population's type distribution. Intermediate densities generate non-monotonic comparative statics, including sharp transitions between moderation and polarization. These findings complement existing empirical results that emphasize the types of connections individuals have on social media by highlighting how the number of connections, holding their composition fixed, may fundamentally shape the information environment in ways that foster/mitigate populism and polarization. |
| Keywords: | Social networks, network density, content filtering, polarization |
| JEL: | D83 D85 L82 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2582 |
| By: | Sebastiano Della Lena; Luca Paolo Merlino; Yves Zenou |
| Abstract: | We study opinion dynamics in a social network consisting of two groups. Agents update their opinions by conforming to members of their own group while rejecting the views of the opposing group (affective polarization), and by listening to a media outlet that may provide biased information. We characterize the long-run opinions and identify when affective polarization and media bias lead to ideological polarization, persistent disagreement, or failures of learning. We also derive when information interventions or censorship improve learning and reduce disagreement, and when they backfire: better information helps only under specific media bias configurations and when directed to the agents we identify as most effective at propagating it through the network. |
| Keywords: | Signed Networks, Opinion Dynamics, Affective Polarization, Group Antagonism, Information Campaigns, Targeting. |
| JEL: | C7 D7 D85 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26001 |
| By: | Margherita Comola (RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay, 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 nationale des ponts et chaussées - 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 nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - UJM EPE - Université Jean Monnet (EPSCPE) - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics) |
| Abstract: | We experimentally investigate targeting decisions in a setting where a human player competes for influence in a network against a computerized opponent with opposing views, whose targeting choice is revealed before the player acts. By varying network structure, opponent influence, and nodes opinion heterogeneity, we find that players typically adopt best-response strategies based on relative influence. However, they sometimes deviate – for example, by erroneously targeting central nodes or by avoiding the opponent's target. Targeting is also affected by affinity and opposition biases, the strength of which depends on the initial opinion distribution. Targeting the center, avoiding the competitor's target, or selecting nodes based on their initial opinions when these are not best responses generates significant efficiency losses. |
| Keywords: | Network, Influence, Targeting, Competition, Experiment |
| Date: | 2026–04–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04706311 |
| By: | Santiago Hermo |
| Abstract: | How does collective bargaining shape the labor market response to economic shocks? I use novel Argentine administrative data to uncover the network of firms linked by collective bargaining and show that positive product-demand shocks to firms within a bargaining unit raise wages at other non-shocked firms in the same unit. Heterogeneous wage and employment responses indicate that propagation operates via collectively bargained wage floors. I develop and estimate a structural model where wage floors are determined in bargaining equilibrium. The model shows that the network shapes the bite of wage floors, which in turn determines the magnitude of shock propagation. |
| Keywords: | collective bargaining, unions, wage floors, monopsony power, trade shocks, shock propagation, rent-sharing |
| JEL: | J51 J52 J42 F16 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:25157 |
| By: | Alessandra Casarico; Edoardo Di Porto; Joanna Kopinska; Salvatore Lattanzio |
| Abstract: | Using a reform that increased parental leave generosity, we estimate workplace peer effects in leave-taking, focusing on fathers. Coworker fathers are more likely to take leave when exposed to more peer fathers affected by the reform. Effects are stronger in establishments with higher social capital and pre-reform leave use. We explain our findings showing that incumbent coworkers drive the effects, same-gender peer influences exceed cross-gender ones, the strongest peer effects run from higher- to lower-ranked occupations, and career penalties are absent for peer fathers. Peer effects extend to coworker fathers' partners, less so to coworker mothers' partners. |
| Keywords: | Parental leave, peer effects, career costs, female labor market participation |
| JEL: | J13 J16 J18 K31 M52 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:25126 |
| By: | Ahmet Gulek |
| Abstract: | I study how local immigration shocks impact labor markets and firms across the economy through production networks. Using Turkey's Syrian refugee crisis and firm-level trade network data, I show that firms buying from host regions demand more labor, while those selling to host regions increase sales. These spillovers depend critically on network centrality: a 1% labor supply increase in Istanbul decreases local real wages by 0.56% while increasing non-host wages by 0.38%. For non-central regions, identical shocks reduce local wages by 1% with negligible spillovers. Network position thus determines whether immigration only lowers local wages or also generates economy-wide gains. |
| Keywords: | Immigration, trade, production network |
| JEL: | F16 F22 J15 J23 J61 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:25109 |
| By: | Situngkir, Hokky; Muhammad Aldy, Hasan |
| Abstract: | Thecollectivemovementofstockpricesharborscomplexinterdependenciesthatareconventionally simplified only through a linear lens. This paper explores structural network representations in the Indonesian capital market by testing the limits of Pearson correlation and Mutual Information (MI) in unveiling the spectral dynamics of the market. Across 2, 328 rolling observation windows from 2015 to 2025, we examine 24 methodological configurations that combine three dependency estimators (Pearson, MI adaptive binning, and MI-kNN), two graph filtering schemes (Minimum Spanning Tree/MST and Planar Maximally Filtered Graph/PMFG), and four community decoders. The empirical results unveil a fundamental reality: topological richness does not always resonate with sectoral classification precision. The Pearson, MST, and Infomap configuration is shown to remain the most robust foundation for recovering conventional sectoral taxonomy. Nevertheless, when deeper observation demands the exposition of local structures and the weave of heterogeneous communities, the architectural relaxation through PMFG demonstrates its superiority. In the realm of residual information detection, MI adaptive binning appears far more proportional than kNN; histogram-based regularization successfully tames empirical noise without sweeping away traces of non-linear dependency. Ultimately, the synergy of MI and PMFG is not positioned to dethrone the dominance of linear correlation, but ratherto provide an essenti alanalytical lens for excavating hidden economic sub-structures—such as the cohesion of commodity regimes—that have long transcended the rigid boundaries of the market’s formal sectors. |
| Keywords: | Econophysics; stock prices; Minimum Spanning Tree (MST); Planar Maximally Filtered Graph (PMFG); Mutual Information; community detection; financial networks |
| JEL: | C1 C6 G11 G28 M0 |
| Date: | 2026–04–25 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128875 |
| By: | Giannoulakis, Michael |
| Abstract: | This chapter investigates the interconnectedness of non-performing loans (NPLs) across 30 European economies, including the UK, using the Diebold–Yilmaz spillover index. Employing a linear VAR model of order 2 and Lanne–Nyberg variance decomposition on 12-period-ahead forecast errors over 2010Q1–2022Q2, the analysis reveals a persistently high total spillover index, indicating strong cross-country linkages in NPL dynamics. The results uncover an important asymmetry: economies that emerged from the global financial crisis in a relatively resilient position often act as net transmitters of NPL spillovers, while more vulnerable banking systems typically absorb them as receivers. This finding challenges the conventional view that fragility is the primary source of contagion, instead highlighting the role of resilient systems in propagating shocks through regional financial networks. The paper contributes to understanding the interplay between macroeconomic stability and credit risk transmission, with implications for European financial stability policy and cross-border supervision. |
| Keywords: | NPL; credit risk; spillovers; financial crisis |
| Date: | 2025–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:51103 |
| By: | André L. S. Chagas (Department of Economics, University of São Paulo) |
| Abstract: | This paper develops specification tests for irregular network panels with time-varying and asymmetric interaction matrices. We decompose each matrix into symmetric and antisymmetric components and show that standard residual quadratic diagnostics, including Moran’s I and the LM-error statistic, are exactly invariant to the antisymmetric component. In contrast, lag-type bilinear diagnostics retain directional information. Building on this dichotomy, we derive a joint score limit for the decomposed lag alternative and propose conditional score tests for directional and contextual relevance. The directional statistic LM tests whether the antisymmetric component contributes information beyond symmetric exposure, while LM provides the corresponding contextual test. The tests have standard chi-square limits under primitive conditions for irregular panels. Monte Carlo evidence shows that the decomposed tests control size and correctly attribute network propagation across contextual and directional channels, whereas conventional quadratic diagnostics are exactly direction-blind and conventional lag diagnostics conflate the two channels. |
| Keywords: | spatial econometrics; network panels; specification testing; asymmetric weight matrix; directed propagation; contextual dependence |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:nereus:022454 |
| By: | Dayin Zhang; Panle Jia Barwick; Lu Han; Jonathan Kroah |
| Abstract: | Despite intense competition among mortgage lenders, borrowers face substantial price dispersion. We argue that realtor–loan officer referral networks are a key source of lender market power: by steering homebuyers toward a small set of loan officers, these networks restrict effective borrower choice even in competitive markets. Using a novel dataset linking 81, 306 realtors to 102, 860 loan officers across 41 states, we document that such networks are pervasive and highly concentrated — 85% of realtors direct over 40% of their clients to fewer than four loan officers — and that this concentration persists and even increases in markets with more lenders. IV estimates indicate that borrowers using referred loan officers pay 18.6 basis points higher mortgage rates, equivalent to $2, 609 in upfront costs on the average loan of $306K. Referral lending raises rate spreads by 36.5% and accounts for half of the residual cross-sectional variation in spreads. The premium is nearly three times as large for Hispanic borrowers as for White borrowers, and is systematically higher for Black borrowers and financially constrained households. We identify two channels: referrals reduce borrowers' search intensity across lenders, and referred loan officers exercise pricing power relative to colleagues within the same institution. Efficiency gains from faster processing and reduced denial risk do not offset the additional costs. |
| JEL: | D40 G21 L14 L85 R31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35015 |