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on Network Economics |
| By: | Patrick Allmis; Paolo Pin; Fernando Vega Redondo |
| Abstract: | We build upon a simple micro-founded model of asset trading proposed by Kyle (1985) to study under what conditions a trader who is privately informed of the future return of the asset may want to share her information with other traders. Despite what conventional wisdom suggests, we show that in the unique equilibrium of the game the informed trader reveals her information with positive probability. A consequence of it is that, in contrast with the corresponding no-communication benchmark, the equilibrium price need not be fully revealing of the asset's return, even if traders are risk neutral. This, in turn, has significant implications on the distribution of the social surplus. While our model initially assumes that inter-agent communication is restricted by an arbitrarily given social network, we also study which such networks arise when links are endogenously formed through traders' prior connection decisions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.11053 |
| By: | Aoxin Zhang; Yingzhe Wang |
| Abstract: | We study systemic default contagion in sparse financial networks and develop a framework for deciding when aggregate exposure matrices are reliable and when node-level network information changes tail risk and control design. The first contribution is a multi-population McKean-Vlasov foundation for distance-to-default dynamics with common noise, bounded state-dependent killing, loss feedback, sparse weighted exposures, and regulatory intervention, including quantitative convergence, propagation of chaos, stability in contagion matrices, controlled well-posedness, a two-population HJB characterization, and a steep-killing bridge to absorbing-boundary contagion. The second contribution is a set of computable matrix-approximation diagnostics: finite-grid bounds driven by row-exposure dispersion and square-edge spread, constructive tail-loss gaps for networks sharing the same aggregate matrix, and a spectral-radius criterion for local cascade onset. The third contribution is an information-value theory for control, showing that node-level graph pressure has strictly positive value when within-type pressure variation interacts with nonsaturated marginal killing reduction. Matched sparse-graph and matrix experiments, common-noise tests, HJB feedback diagnostics, fixed-budget control comparisons, and EBA/Pillar 3-calibrated synthetic networks validate the framework. The main conclusion is that finite-type matrices are effective in regular-mixing regimes, whereas concentrated sparse exposures generate tail-risk and intervention effects that require local-pressure diagnostics and network-aware control. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.24833 |
| By: | Francesco Amodio; Giorgio Chiovelli; Serafin Frache |
| Abstract: | We show that commodity export booms can propagate up the value chain, reshape production networks, and drive growth and transformation in the service sector. We study Uruguay's beef export boom to China in the 2010s, combining customs, firm-to-firm transactions, employer-employee, and balance sheet data. Domestic suppliers to beef exporters that expanded trade with China recorded higher sales, especially in services, with associated gains in employment, wages, and sales per worker, along with increased imports of high-quality products. Aggregate sales in the economy rose by 1.79%, with each export dollar generating 46 more cents in domestic sales, including 10 cents in services. Over time, service firms reoriented their connections toward beef exporters, amplifying their gains from trade. |
| Keywords: | commodity exports, production network, services, China shock |
| JEL: | F14 L14 O14 O54 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26158 |
| By: | Hu, Yan (Copenhagen Business School); Maurer, Stephan (UPF Barcelona School of Management) |
| Abstract: | Do minorities benefit from social networks? In this paper, we study this question using the historical example of China’s first modern bureaucratic organization, the Chinese Maritime Customs Service. Drawing on newly digitized personnel records from 1876-1911, we first show that the Chinese clerks employed by the service were predominantly Cantonese. Using the plausibly exogenous transfers of clerks across stations, we then estimate that a non-Cantonese (minority) clerk benefited significantly from meeting at least one colleague from his same province and dialect. Such connections led to faster promotion and a 5.6% salary increase, with even stronger effects when meeting a clerk who was either senior or of high quality. |
| Keywords: | Chinese Maritime Customs Service, social connections, wages, promotion, minorities |
| JEL: | J15 J31 J45 N35 N75 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18689 |
| By: | Degui Li (Faculty of Business Administration, University of Macau); Yuying Sun (Chinese Academy of Sciences); Boyao Wu (University of International Business and Economics) |
| Abstract: | In this paper, we introduce a flexible time-varying multi-layer network vector autoregression (VAR) model framework for large-scale time series, allowing agents in dynamic systems to interact through multiple channels and incorporating multiple adjacency matrices to capture network spillover effects. We propose a penalized model averaging method to determine a time-varying optimal combination of multi-layer network VAR candidate models whose number may be divergent. Under some regularity conditions, the asymptotic properties such as asymptotic optimality and convergence rates of the proposed time-varying weight estimation are derived in the contexts of both the in-sample fitting and out-of-sample prediction. In addition, we extend the conformal prediction method to construct prediction bands for locally stationary time series. Monte-Carlo simulation studies and an empirical application to forecast CPI inflation by combining multiple network information are given to illustrate reliable finite-sample estimation and predictive performance of the developed methodology. |
| Keywords: | asymptotic optimality, conformal prediction, model averaging, multi-layer network, time-varying VAR |
| JEL: | C32 C38 C55 C58 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202640 |
| By: | Laliberté, Jean-William (University of Calgary); Whalley, Alexander (University of Calgary) |
| Abstract: | We use matched parent-child-employer-employee data from Canada, linked to detailed educational records, to quantify the contribution of social connections to employers to intergenerational income mobility. Sorting across employers accounts for roughly a third of the transmission of income across generations. To estimate the impact of social connections on differential representation across employers, we compare classmates -- those with the same degree from the same institution -- who have different social connections. We find social connections in the labor market explain about 15% of the firm-sorting component of the intergenerational income rank-rank relationship, about a third the explanatory power of education. |
| Keywords: | social connections, intergenerational mobility |
| JEL: | J62 J31 J24 L25 E24 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18691 |
| By: | Hutschenreiter, Dennis; Liu, Qianshuo |
| Abstract: | This paper examines whether common institutional ownership is associated with CEO connectedness across firms. We document that higher common ownership between two same-industry firms predicts a greater likelihood that a newly appointed CEO has preexisting social ties to the incumbent CEO of the peer firm. To address endogeneity, we use mergers among institutional investors in a stacked difference-in-differences design. In a hiring-firm-peer panel that carries connection status forward from the most recent appointment, exposure to a merger-induced common blockholder approximately doubles the probability that the pair is observed in a connected-CEO state. In a broader firm-pair panel, it increases the probability of CEO connections by 48.7%. We further document that gaining CEO connections through another firm's CEO appointment is associated with improvements in peer firms' returns on assets and Tobin's Q, in both OLS and IV specifications. Peer firms that gain such a connection also experience positive abnormal returns around other firms' CEO hiring announcements, corresponding to an average increase of $112.5 million in shareholder value. These performance patterns suggest that CEO connections may be valuable from a portfolio-level perspective. Consistent with this interpretation, the association between common ownership and CEO connections is concentrated among product-similar and organizationally complex firms and strengthens after the 2008-2009 financial crisis, when connections appear more valuable. Our findings point to CEO connection as a potential governance channel through which common institutional ownership is linked to firm outcomes, complementing prior work on executive compensation, shareholder voting, and board interlocks. |
| Keywords: | CEO connections, CEO selection, common ownership, corporate governance, firm performance |
| JEL: | G23 G32 G34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:341627 |
| By: | Tahar Kharchi (École Normale Supérieure de Sétif, LAGAM - Laboratoire de Géographie et d'Aménagement de Montpellier - UMPV - Université de Montpellier Paul-Valéry) |
| Abstract: | This study examines the spatial and economic dimensions of parallel trade networks in Algeria's high plateau region, focusing on Setif and El Eulma as representative urban systems. Using spatial econometric methods and network analysis, we investigate how informal economic structures, particularly the "Doubaï markets, " have reshaped urban hierarchies and regional economic integration. Our analysis reveals that El Eulma has emerged as a critical node in transnational informal trade, connecting North African markets with Mediterranean and Asian supply chains. The parallel economy, estimated at 33-45% of regional GDP, operates through sophisticated networks that bypass formal institutions while generating significant employment and commercial activity. We employ a mixed-methods approach combining MIMIC (Multiple Indicator Multiple Causes) models, spatial autoregressive specifications, and qualitative network mapping to quantify these relationships. Results demonstrate strong spatial spillovers between formal and informal sectors, with infrastructure development and institutional quality serving as key determinants of informal economy size. The study contributes to urban economics literature by documenting how second-tier cities in resource-dependent economies develop alternative growth pathways through informal trade networks. Policy implications suggest that integration strategies focusing on reduced transaction costs and simplified regulation may prove more effective than enforcement-based approaches. |
| Keywords: | Urban economics, Transnational commerce, Regional development, Parallel trade, Spatial networks, Commerce parallèle, Développement régional, Échanges transnationaux, Économie urbaine, Réseaux spatiaux |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05626114 |