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on Network Economics |
| By: | Serafica, Ramonette B.; Tabuga, Aubrey D.; Baino, Madeleine Louise S.; Ruiz, Mark Gerald C. |
| Abstract: | This exploratory study focuses on understanding the structure of networks of financial institutions in the Philippines. The literature notes that the financial sector occupies a central position within corporate networks. More importantly, the significance of deepening understanding of the connections within the financial sector stems from its role as an intermediate sector. The financial sector is crucial because of its role in promoting efficiency in other economic sectors. In fact, this sector occupies a unique position of influence regarding how the wealth of an economy is generated and allocated. Using a network lens, the structure of interrelationships via ownership is examined to draw insights related to corporate control, competition, and financial sector development. Data from the Philippine Stock Exchange on publicly listed financial companies and their networks is utilized to distinguish between subsidiary networks, ownership networks, and networks created by board interlocks. The subsidiary network of financial companies is found to be fragmented, and the connections among members of a group are closely knit. Subsidiary networks exhibit a hub-and-spoke structure, with a parent company in the center and subsidiaries around it. This centralized structure is thought to be used by investment companies to pool assets, cut costs, and improve efficiency. Financial institutions also diversify their portfolios by owning various companies not only in the financial sector but also in other sectors. Evidence of interconnections among companies in the financial sector and between financial companies and others is found. The networks formed via interlocks of board members and officers show a high proportion of triples, suggesting ease of reaching others within a short distance—a characteristic of the small-world phenomenon. The finding of an interconnected network, nearly a single-component network, also suggests that the extent of corporate control can be broad. Comments on this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph. |
| Keywords: | financial netwoks;corporate control;competition;finance;ownership networks;subsidiary networks;board interlocks;Philippine financial sector;network structure;corporate governance;interlocking directorates;network analysis;network fragmentation |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:phd:dpaper:dp_2024-17 |
| By: | Effrosyni Adamopoulou (University of Mannheim); Jeremy Greenwood (University of Pennsylvania); Nezih Guner (CEMFI); Karen Kopecky |
| Abstract: | 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 a person’s best friends’ opioid misuse on their own 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 in a population where 17 percent ever misuses opioids. The effect is concentrated among non-college graduates and peers with strong ties who are central in their friendship networks. Peer opioid misuse leads to deteriorating health, opioid addiction, and eventually death. |
| Keywords: | peer-group effects, instrumental variables, Add Health, severe injuries |
| JEL: | C26 D10 I12 J11 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hka:wpaper:2024-020 |
| By: | Sabrina Lucia Di Addario; Zhexin Feng; Michel Serafinelli |
| Abstract: | This paper presents direct evidence on how firms' innovation is affected by access to knowledgeable labor through co-worker network connections. We use a unique dataset that matches patent data to administrative employer-employee records from "Third Italy"-a region with many successful industrial clusters. Establishment closures displacing inventors generate supply shocks of knowledgeable labor to firms that employ the inventors' previous co-workers. We estimate event-study models where the treatment is the displacement of a "connected" inventor (i.e., a previous coworker of a current employee of the focal firm). We show that the displacement of a connected inventor significantly increases connected inventors' hiring. Moreover, the improved access to knowledgeable workers raises firms innovative activity. We provide evidence supporting the main hypothesized channel of knowledge transfer through firm-to-firm labor mobility by estimating IV specifications where we use the displacement of a connected inventor as an instrument to hire a connected inventor. Overall, estimates indicate that firms exploit displacements to recruit connected inventors and the improved capacity to employ knowledgeable labor within the network increases innovation. |
| Keywords: | social connections, firm-to-firm labor mobility, patents, establishment closure |
| JEL: | J60 O30 J23 |
| URL: | https://d.repec.org/n?u=RePEc:csl:devewp:497 |
| By: | Camilo Garcia-Jimeno; Sahar Parsa |
| Abstract: | Through their writing, people often reflect their values. Since the 1970s, academic economists have gradually changed their third-person pronoun choices, from using the masculine form to incorporating feminine and plural forms. We document this transition empirically, and examine the role of social interactions among economists in driving the cultural change reflected in these choices. Our analysis relies on a model where writing style depends on the influence of academic peers, the implicit negotiation between co-authors, and individual authors’ preferences for expressing gender equality values in their writing. We directly measure peer influence relying on time-varying academic connections between economists, and propose a methodology that uses a homophily-based model of co-authoring decisions to isolate the effect of peer influence from unobserved personal preferences. The model allows us to decompose the observed changes in writing style over the last 50 years into generational shifts, the increasing prevalence of co-authorship in the profession, the increasing share of female economists, and peer influence. Generational changes and the growing share of women in the profession play a minor role. Early on, contrarian economists accelerated the pace of change in writing styles by moving away from their peers’ behavior. The large fraction of conformists and the overall homophily in co-authoring, in contrast, slowed the adoption of innovative writing styles by restricting economists’ exposure to peers with different gender-attitude signaling preferences. |
| Keywords: | Gender; Social norms; Social networks |
| JEL: | D71 D83 D85 J16 Z1 |
| Date: | 2024–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:99311 |
| By: | Tae-Hwy Lee (Department of Economics, University of California Riverside); Ekaterina Seregina (Colby College) |
| Abstract: | In this paper we develop a novel method of combining many forecasts based on Graphical LASSO. We represent forecast errors from different forecasters as a network of interacting entities and generalize network inference in the presence of common factor structure and structural breaks. First, we note that forecasters often use common information and hence make common errors, which makes the forecast errors exhibit common factor structures. We separate common forecast errors from the idiosyncratic errors and exploit sparsity of the precision matrix of the latter. Second, since the network of experts changes over time as a response to unstable environments, we propose Regime-Dependent Factor Graphical LASSO (RD-FGL) that allows factor loadings and idiosyncratic precision matrix to be regime-dependent. The empirical applications to forecasting macroeconomic series using the data of the European Central Bank’s Survey of Professional Forecasters and Federal Reserve Economic Data monthly database demonstrate superior performance of a combined forecast using RD-FGL. |
| Keywords: | Common Forecast Errors; Regime Dependent Forecast Combination; Sparse Precision Matrix of Idiosyncratic Errors; Structural Breaks |
| JEL: | C13 C38 C55 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ucr:wpaper:202413 |
| By: | Donggyu Kim (Department of Economics, University of California Riverside); Minseog Oh |
| Abstract: | In financial applications, we often observe both global and local factors that are modeled by a multi-level factor model. When detecting unknown local group memberships under such a model, employing a covariance matrix as an adjacency matrix for local group memberships is inadequate due to the predominant effect of global factors. Thus, to detect a local group structure more effectively, this study introduces an inverse covariance matrix-based financial adjacency matrix (IFAM) that utilizes negative values of the inverse covariance matrix. We show that IFAM ensures that the edge density between different groups vanishes, while that within the same group remains non-vanishing. This reduces falsely detected connections and helps identify local group membership accurately. To estimate IFAM under the multi-level factor model, we introduce a factor-adjusted GLASSO estimator to address the prevalent global factor effect in the inverse covariance matrix. An empirical study using returns from international stocks across 20 financial markets demonstrates that incorporating IFAM effectively detects latent local groups, which helps improve the minimum variance portfolio allocation performance. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ucr:wpaper:202420 |