Economics: Research Guide

This paper presents experimental evidence on games where individuals can unilaterally decide on their links with each other. Linking decisions give rise to directed graphs. We consider two classes of situations: one, benefits flow along the direction of the network paths (one-way flow), and two, when the benefits flow on network paths without regard to the direction of links (two-way flow). Our experiments reveal that in the one-way flow model subjects create sparse networks whose distance grows and efficiency falls as group size grows; by contrast, in the two-way flow model subjects create sparse and small world networks whose efficiency remains high in both small and large groups. We show ..

We extend the Schumpeter meeting Keynes (K+S; see Dosi et al., 2010, 2013, 2015) to model the emergence and the dynamics of an interbank network in the money market. The extended model allows banks to directly exchange funds, while evaluating their interbank positions using a network- based clearing mechanism (NEVA, see Barucca et al., 2020). These novel adds on, allow us to better measure financial contagion and systemic risk events in the model and to study the possible interactions between micro-prudential and macro-prudential policies. We find that the model can replicate new stylized facts concerning the topology of the interbank network, as well as the dynamics of individual banksââ..

Most societies in the world contain strong group identities and the culture supporting these groups is highly persistent. This persistence in turn gives rise to a practical problem: how do and should societies with strong group identities organize themselves for exchange and public good provision? In this paper, we develop a theoretical framework – with social structure characterized by number and size of groups as well as quality of ties between them – that allows us to study, normatively and positively, the relationship between social structure, state capacity, and economic activity.

We study how professional networks are related to immigrant labour market integration. Matched employer-employee data for Sweden show that networks grow with time in the host country and that their composition changes from immigrant toward native network members. A firm-dyadic analysis of re-employment of displaced workers suggests that conational connections have a much larger positive effect than native connections. However, the employment effect of native connections grows with years since migration. Furthermore, native connections tend to be associated with higher earnings and increased hires in connected local industries. After 20 years in Sweden, the built-up connections raise immigran..

This paper conducts an in-depth mapping of global value chain (GVC) vulnerabilities, using granular product-level trade data to identify vulnerable products with limited suppliers and substitutability. The study reveals that, in OECD countries, approximately 8% of foreign-sourced intermediate products are vulnerable, with about 50 products identified as highly vulnerable, particularly in the pharmaceutical, mining, and manufacturing sectors. The paper also introduces a quantitative framework for simulating supply shock transmission from upstream suppliers to downstream industries over the short and medium term. This framework leverages unique data that combine Inter-Country Input-Output with..

We introduce loss aversion into a model of conspicuous consumption in networks. Agents allocate heterogeneous incomes between a conventional good and a status good. They interact over a connected network and compare their status consumption to their neighbors’ average consumption. We find that aversion to lying below the social reference point has a profound impact. If loss aversion is large relative to income heterogeneity, a continuum of conformist Nash equilibria emerges. Agents have the same status consumption, despite differences in incomes and network positions, and the equilibrium is indeterminate. Otherwise, there is a unique Nash equilibrium and status consumption depends on ..

African armed conflicts involve a myriad of state forces, rebel groups and extremist organisations bound by rapidly changing alliances and rivalries. Organisations that were allies one day can fight each other the next and co-operate later still. The objective of this note is to update the pioneer work on conflict networks conducted by the OECD Sahel and West Africa Club (SWAC) in the region by using a formal approach to networks known as dynamic social network analysis. Leveraging a dataset of 3 800 actors and 60 000 violent events from the Armed Conflict Location & Event Data Project (ACLED) from 1997-2023, the note monitors how the co-operative and rivalrous ties between violent actors ha..

Using friendship data from Facebook, we study the effects of three aspects of social capital on household financial behavior. We find that the most important measure of social capital in explaining stock market and saving participation is Economic Connectedness, defined as the fraction of one’s social network with high socioeconomic status. One standard-deviation greater Economic Connectedness is associated with 2.9% greater stock market participation and 5.0% greater saving participation. Compared to Cohesiveness or Civic Engagement, Economic Connectedness explains more than 6 times the variation in stock market participation and more than 4 times the variation in saving participation. Us..

User financial default prediction plays a critical role in credit risk forecasting and management. It aims at predicting the probability that the user will fail to make the repayments in the future. Previous methods mainly extract a set of user individual features regarding his own profiles and behaviors and build a binary-classification model to make default predictions. However, these methods cannot get satisfied results, especially for users with limited information. Although recent efforts suggest that default prediction can be improved by social relations, they fail to capture the higher-order topology structure at the level of small subgraph patterns. In this paper, we fill in this gap..

We study whether competition for social status induces higher effort provision and efficiency when individuals collaborate with their network neighbors. We consider a laboratory experiment in which individuals choose a costly collaborative effort and their network neighbors. They benefit from their neighbors' effort and effort choices of direct neighbors are strategic complements. We introduce two types of social status in a 2x2 factorial design: 1) individuals receive monetary benefits for incoming links representing popularity; 2) they receive feedback on their relative payoff ranking within the group. We find that link benefits induce higher effort provision and strengthen the collaborati..

We study how job-seekers share information about jobs within their social network, and its implications for firms. We randomly increase the amount of competition for a job and find that job-seekers are less likely to share information about the job with their high ability peers. This lowers the quality of applicants, hires, and performance on the job - suggesting that firms who disseminate job information through social networks may see lower quality applicants than expected for their most competitive positions. While randomly offering higher wages attracts better talent, it is not able to fully overcome these strategic disincentives in information sharing.

Network diffusion models are used to study things like disease transmission, information spread, and technology adoption. However, small amounts of mismeasurement are extremely likely in the networks constructed to operationalize these models. We show that estimates of diffusions are highly non-robust to this measurement error. First, we show that even when measurement error is vanishingly small, such that the share of missed links is close to zero, forecasts about the extent of diffusion will greatly underestimate the truth. Second, a small mismeasurement in the identity of the initial seed generates a large shift in the locations of expected diffusion path. We show that both of these resul..

We show that supply networks are inefficiently, and insufficiently, resilient. Upstream firms can expand their production capacity to hedge against supply and demand shocks. But the social benefits of such investments are not internalized due to market power and market incompleteness. Upstream firms under-invest in capacity and resilience, passing-on the costs to down-stream firms, and drive trade excessively towards the spot markets. There is a wedge between the market solution and a constrained optimal benchmark, which persists even without rare and large shocks. Policies designed to incentivize capacity investment, reduce reliance on spot markets, and enhance competition ameliorate the ex..

Pairs trading, a strategy that capitalizes on price movements of asset pairs driven by similar factors, has gained significant popularity among traders. Common practice involves selecting highly cointegrated pairs to form a portfolio, which often leads to the inclusion of multiple pairs sharing common assets. This approach, while intuitive, inadvertently elevates portfolio variance and diminishes risk-adjusted returns by concentrating on a small number of highly cointegrated assets. Our study introduces an innovative pair selection method employing graphical matchings designed to tackle this challenge. We model all assets and their cointegration levels with a weighted graph, where edges sign..

We experimentally study effort provision and network formation in the linear-quadratic game characterized by positive externality and complementarity of effort choices among network neighbors. We compare experimental outcomes to the equilibrium and efficient allocations and study the impact of group size and linking costs. We find that individuals overprovide effort relative to the equilibrium level on the network they form. However, their payoffs are lower than the equilibrium payoffs because they create fewer links than it is optimal which limits the beneficial spillovers of effort provision. Reducing the linking costs does not significantly increase the connectedness of the network and th..

In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the prices of certain external assets either decrease or increase, all banks exposed to them experience varying degrees of simultaneous shocks to their balance sheets. These coordinated and structured shocks have the potential to exacerbate the likelihood of defaults. In this context, we introduce first a concept of {default resilience margin}, $\epsilon^*$, i.e., the maximum amplitude of asset prices fluctuations that the network can tolerate without generating..

Street networks allow people and goods to move through cities, but they are vulnerable to disasters like floods, earthquakes, and terrorist attacks. Well-planned network design can make a city more resilient and robust to such disruptions, but we still know little about worldwide patterns of vulnerability, or worldwide empirical relationships between specific design characteristics and resilience. This study quantifies and measures the vulnerability of the street networks of every urban area in the world then models the relationships between vulnerability and street network design characteristics. To do so, we simulate over 2.4 billion trips across more than 8, 000 urban areas in 178 countri..

This paper studies the relationship between the creative abilities of study peers and academic achievement. We conduct a novel large scale field experiment at university, where students are randomized into work groups based on their score on a creativity test prior to university entry. We first show that the creative abilities of peers matter for a student's academic achievement. A one standard deviation higher creativity peer group improves study performance by 8.4 to 10 percentage points. Notably, this effect is driven by the average group creativity, there is no special impact of creative superstars. Further analysis suggests that students exposed to creative peers become more creative, b..

This paper analyzes peer effects at the University of St. Gallen (HSG) in Switzerland. The identification strategy relies on randomized student groups to investigate how graduates’ outcomes are affected by the social composition of their peer groups. The results indicate that a 10 percentage points higher share of peers with low socio-economic status (SES) leads to a 5.08% increase in graduates’ income one year after graduation. The effect is strongest on other low-SES students and functions through an adoption of job searching behavior, occupational choices and labor supply. I do not find evidence in this sample that the outcomes of low-SES students are negatively affected by high-SES p..

We estimate the short-run effects of severe weather shocks on local economic activity and assess cross-border spillovers operating through economic linkages between U.S. states. We measure weather shocks using a detailed county-level database on emergency declarations triggered by natural disasters and estimate their impacts with a monthly Global Vector Autoregressive (GVAR) model for the U.S. states. Impulse responses highlight significant country-wide macroeconomic effects of weather shocks hitting individual regions. We also show that (i) taking into account economic interconnections between states allows capturing much stronger spillover effects than those associated with mere spatial ad..

This paper introduces a methodology to conduct robust inference in bipartite networks under local misspecification. We focus on a class of dyadic network models with misspecified conditional moment restrictions. The framework of misspecification is local, as the effect of misspecification varies with the sample size. We utilize this local asymptotic approach to construct a robust estimator that is minimax optimal for the mean square error within a neighborhood of misspecification. Additionally, we introduce bias-aware confidence intervals that account for the effect of the local misspecification. These confidence intervals have the correct asymptotic coverage for the true parameter of intere..

The connectivity of stock markets reflects the information efficiency of capital markets and contributes to interior risk contagion and spillover effects. We compare Shanghai Stock Exchange A-shares (SSE A-shares) during tranquil periods, with high leverage periods associated with the 2015 subprime mortgage crisis. We use Pearson correlations of returns, the maximum strongly connected subgraph, and $3\sigma$ principle to iteratively determine the threshold value for building a dynamic correlation network of SSE A-shares. Analyses are carried out based on the networking structure, intra-sector connectivity, and node status, identifying several contributions. First, compared with tranquil peri..

This paper introduces a Large Language Model (LLM)-based multi-agent framework designed to enhance anomaly detection within financial market data, tackling the longstanding challenge of manually verifying system-generated anomaly alerts. The framework harnesses a collaborative network of AI agents, each specialised in distinct functions including data conversion, expert analysis via web research, institutional knowledge utilization or cross-checking and report consolidation and management roles. By coordinating these agents towards a common objective, the framework provides a comprehensive and automated approach for validating and interpreting financial data anomalies. I analyse the S&P 500 ..

Many classical inferential approaches fail to hold when interference exists among the population units. This amounts to the treatment status of one unit affecting the potential outcome of other units in the population. Testing for such spillover effects in this setting makes the null hypothesis non-sharp. An interesting approach to tackling the non-sharp nature of the null hypothesis in this setup is constructing conditional randomization tests such that the null is sharp on the restricted population. In randomized experiments, conditional randomized tests hold finite sample validity. Such approaches can pose computational challenges as finding these appropriate sub-populations based on expe..

This article shows how coworker performance affects individual performance evaluation in a teamwork setting at the workplace. We use high-quality data on football matches to measure an important component of individual performance, shooting performance, isolated from collaborative effects. Employing causal machine learning methods, we address the assortative matching of workers and estimate both average and heterogeneous effects. There is substantial evidence for spillover effects in performance evaluations. Coworker shooting performance, meaningfully impacts both, manager decisions and third-party expert evaluations of individual performance. Our results underscore the significant role cowo..

Stronger enforcement of discrimination laws can help to reduce disparities in economic outcomes with respect to race, ethnicity, and gender in the United States. However, the data necessary to detect possible discrimination and to act to counter it is not publicly available – in particular, data on racial, ethnic, and gender disparities within specific companies. In this paper, we explore and develop methods to use information extracted from publicly available LinkedIn data to measure the racial, ethnic, and gender composition of company workforces. We use predictive tools based on both names and pictures to identify race, ethnicity, and gender. We show that one can use LinkedIn data to ob..

This paper concerns the analysis of network data when unobserved node-specific heterogeneity is present. We postulate a weighted version of the classic stochastic block model, where nodes belong to one of a finite number of latent communities and the placement of edges between them and any weight assigned to these depend on the communities to which the nodes belong. A simple rank condition is presented under which we establish that the number of latent communities, their distribution, and the conditional distribution of edges and weights given community membership are all nonparametrically identified from knowledge of the joint (marginal) distribution of edges and weights in graphs of a fixe..

We study a model of conflict with multiple battlefields and the possibility of investments spillovers between the battlefields. Results of conflicts at the individual battlefields are determined by the Tullock contest success function based on efforts assigned to a battlefield as well as efforts spilling over from the neighbouring battlefields. We characterize Nash equilibria of this model and uncover a network invariance result: equilibrium payoffs, equilibrium total expenditure, and equilibrium probabilities of winning individual battlefields are independent of the network of spillovers. We show that the network invariance holds for any contest success function that is homogeneous of degre..

The role of friends in the US opioid epidemic is examined. Using data from the National Longitudinal Survey of Adolescent Health (Add Health), adults aged 25-34 and their high school best friends are focused on. An instrumental variable technique is employed to estimate peer effects in opioid misuse. Severe injuries in the previous year are used as an instrument for opioid misuse in order to estimate the causal impact of someone misusing opioids on the probability that their best friends also misuse. The estimated peer effects are significant: Having a best friend with a reported serious injury in the previous year increases the probability of own opioid misuse by around 7 percentage points ..

Policy networks are an important source of information for policy making. Yet, we have only a limited understanding of how policy networks are structured among innovation policy makers and which factors shape their structure. This paper studies how proximities can explain what drives the connections in policy networks. More specifically, we look at innovation policy networks between EU member states. We use social network analysis based on our own data to map the networks of the 28 EU innovation policy directors, consisting of 756 potential connections, and study the proximities shaping these networks. Geographical and cultural proximity turn out to be strong predictors for symmetric and asy..