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on Network Economics |
| By: | Balakina, Olga; Bäckman, Claes; Parakhoniak, Anastasiia |
| Abstract: | What are the aggregate and distributional consequences of the relationship between an individual's social network and financial decisions? Motivated by several well-documented facts about the influence of social connections on financial decisions, we build and calibrate a model of stock market participation with a social network that emphasizes the interplay between connectivity and network structure. Since connections to informed agents help spread information, there is a pivotal role for factors that determine sorting among agents. An increase in the average number of connections raises the average participation rate, mostly due to richer agents. A higher degree of sorting benefits richer agents by creating clusters where information spreads more efficiently. We show empirical evidence consistent with the importance of connectivity and sorting. We discuss several new avenues for future research into the aggregate impact of peer effects in finance. |
| Keywords: | Social networks, Peer effects, Stock Market Participation, Connectivity, Homophily |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:289595&r=net |
| By: | Pau Milán; Nicolás Oviedo Dávila |
| Abstract: | Risk-averse workers in a team exert effort to produce joint output. Workers’ incentives are connected via chains of productivity spillovers, represented by a network of peer-effects. We study the problem of a principal offering wage contracts that simultaneously incentivize and insure agents. We solve for the optimal linear contract for any network and show that optimal incentives are loaded more heavily on workers that are more central in a specific way. We conveniently link firm profits to network structure via the networks spectral properties. When firms can’t personalize contracts, better connected workers ex- tract rents. In this case, a group composition result follows: large within-group differences in centrality can decrease firm’s profits. Finally, we find that modular production has important implications for how peer structures distribute incentives. |
| Keywords: | moral hazard, Networks, Incentives, Organizations, contracts |
| JEL: | D11 D52 D53 G52 |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1439&r=net |
| By: | Yejin Kim; Youngbin Lee; Minyoung Choe; Sungju Oh; Yongjae Lee |
| Abstract: | This paper explores the utilization of Temporal Graph Networks (TGN) for financial anomaly detection, a pressing need in the era of fintech and digitized financial transactions. We present a comprehensive framework that leverages TGN, capable of capturing dynamic changes in edges within financial networks, for fraud detection. Our study compares TGN's performance against static Graph Neural Network (GNN) baselines, as well as cutting-edge hypergraph neural network baselines using DGraph dataset for a realistic financial context. Our results demonstrate that TGN significantly outperforms other models in terms of AUC metrics. This superior performance underlines TGN's potential as an effective tool for detecting financial fraud, showcasing its ability to adapt to the dynamic and complex nature of modern financial systems. We also experimented with various graph embedding modules within the TGN framework and compared the effectiveness of each module. In conclusion, we demonstrated that, even with variations within TGN, it is possible to achieve good performance in the anomaly detection task. |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2404.00060&r=net |
| By: | Lei Bill Wang; Om Prakash Bedant; Haoran Wang; Zhenbang Jiao; Jia Yin |
| Abstract: | In this paper, we look at a school principal's class assignment problem. We break the problem into three stages (1) friendship prediction (2) peer effect estimation (3) class assignment optimization. We build a micro-founded model for friendship formation and approximate the model as a neural network. Leveraging on the predicted friendship probability adjacent matrix, we improve the traditional linear-in-means model and estimate peer effect. We propose a new instrument to address the friendship selection endogeneity. The estimated peer effect is slightly larger than the linear-in-means model estimate. Using the friendship prediction and peer effect estimation results, we simulate counterfactual peer effects for all students. We find that dividing students into gendered classrooms increases average peer effect by 0.02 point on a scale of 5. We also find that extreme mixing class assignment method improves bottom quartile students' peer effect by 0.08 point. |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2404.02497&r=net |
| By: | Brandily, P.; Rauch, F. |
| Abstract: | In this paper we study the role of within-city roads layout in fostering city growth. Within-city roads networks have not been studied extensively in economics although they are essential to facilitate human interactions, which are at the core of agglomeration economies. We build and compute several simple measures of roads network and construct a sample of over 1800 cities and towns from Sub-Saharan Africa. Using a simple econometric model and two instrumental variable strategies based on the history of African cities, we then estimate the causal impact of within-city roads layout on urban growth. We find that over the recent decades, cities with greater road density and road evenness in the centre grew faster. |
| Keywords: | urbanisation; road layout; Sub-Saharan Africa; urban planning |
| JEL: | J1 |
| Date: | 2024–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122580&r=net |