Economic and social networks Syllabus, Fall 2014
Department of Economics, Central European University Tuesday 3:30-5:30pm, usually 509 FT
2 Credits
www.personal.ceu.hu/staff/Adam_Szeidl/networkscourse/networkscourse.htm Instructor: Professor Adam Szeidl
szeidla@ceu.hu
Office hours: Thurs 4-5pm, 414 Nador 11., sign up online
Social networks affect many economic transactions. They transmit information about job opportunities, affect the trade of goods and services, influence how diseases spread, which products we buy, how we vote, whether we become criminals, which technologies we adopt. They also create trust and provide access to financial and other resources. This course reviews some current research on social networks in economics. We will explore both theoretical models and their applications to development and labor economics. The course begins with an overview of basic facts and tools. We will then cover network formation, peer effects and the social multiplier, social capital and trust, information aggregation in networks, social learning, trade in networks, technology diffusion, job search, and other topics. One goal of the course is to identify new research questions for students.
Requirements. Student presentations, homeworks and a final exam. Small groups of students will be assigned a topic, and several lectures will consist entirely of student pre- sentations. There will also be regular homework assignments. These will not be graded, but we will provide solutions.
Your course grade will be determined as follows:
Student presentation 50%
Final exam 50%
Prerequisites. This course is intended for second-year MA and for PhD students, and knowledge of MA level microeconomics and econometrics is assumed.
Learning outcomes. By the end of this course, students will have: (1) Knowledge and understanding of the current research on the economics of social networks. (2) The ability to read research papers in this field. (3) The ability to present and critically discuss research
papers in this field. (4) Sufficient understanding of open issues to formulate a new research question in this field.
Final. The final exam is on December 16, 9am-12pm, FT 509.
Texts. The textbook for the course is
Matthew O. Jackson (2008)Social and Economic Networks, Princeton University Press, link
For many classes, lecture notes will also be made available.
Reading List
* denotes required reading. The reading list and topics will be updated as the course evolves, and the latest version will be posted on the course website.
1. Theoretical and empirical background
*Jackson Chapters 1-3.
*Glaeser, Edward L., Jose A. Scheinkman, and Bruce I. Sacerdote. “The Social Multi- plier.” Journal of the European Economic Association 1, no. 2/3 (April 1, 2003): 345–353.
link.
*Granovetter, Mark. “The Impact of Social Structure on Economic Outcomes.” The Journal of Economic Perspectives 19, no. 1 (2005): 33–50. link
*Manski, Charles F. “Identification of Endogenous Social Effects: The Reflection Prob- lem.” The Review of Economic Studies 60, no. 3 (July 1, 1993): 531–542. link
Rauch, James E. “Does Network Theory Connect to the Rest of Us? A Review of Matthew O. Jackson’s Social and Economic Networks.” Journal of Economic Literature (2010): 980–986. link
2. Peer effects A. Theory
Ballester, Coralio, Antoni Calvo-Armengol, and Yves Zenou. “Who’s Who in Networks.
Wanted: The Key Player.” Econometrica 74, no. 5 (2006): 1403–1417. link B. Education and the workplace
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. “Social Incentives in the Work- place.” The Review of Economic Studies 77, no. 2 (2010): 417–458. link
———. “Social Preferences and the Response to Incentives: Evidence from Personnel Data.” The Quarterly Journal of Economics 120, no. 3 (2005): 917–962. link
*Carrell, Scott E., B. I. Sacerdote, and James E. West. “From Natural Variation to Optimal Policy? The Importance of Endogenous Peer Group Formation.” Econometrica (2012). link.
*Mas, Alexandre, and Enrico Moretti. “Peers at Work.” The American Economic Review 99, no. 1 (2009): 112–145. link
*Sacerdote, Bruce. “Peer Effects with Random Assignment: Results for Dartmouth Roommates.” The Quarterly Journal of Economics 116, no. 2 (2001): 681–704. link
C. Learning and technology adoption
*Banerjee, Abhijit, Arun G. Chandrasekhar, Esther Duflo, and Matthew O. Jackson.
“The diffusion of microfinance.“ Science 341.6144 (2013) link.
Bayer, Patrick, Randi Pintoff, David E. Pozen. “Building Criminal Capital Behind Bars: Social Learning in Juvenile Corrections.” The Quarterly Journal of Economics 124, no. 1 (2009): 104-147. link
Bloom, Nicholas, Mark Schankerman and John Van Reenen. “Identifying Technology Spillovers and Product Market Rivalry”. Econometrica 81, no. 4 (2013):1347-1393. link
Cai, Jing, Alain de Janvry, and Elisabeth Sadoulet. “Social Networks and the Decision to Insure.” MPRA Paper, May 9, 2013. link.
Chetty, Raj, John N. Friedman, and Emmanuel Saez. 2013. “Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings.“ Amer- ican Economic Review, 103(7): 2683-2721.link
Conley, Timothy G., and Christopher R. Udry. “Learning About a New Technology:
Pineapple in Ghana.” The American Economic Review (2010): 35–69. link
Duflo, Esther, and Emmanuel Saez. “The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment.” The Quarterly Journal of Economics 118, no. 3 (2003): 815–842. link
Kelly, Morgan, and Cormac O Grada. “Market Contagion: Evidence from the Panics of 1854 and 1857.” American Economic Review (2000): 1110–1124. link
Kremer, Michael, and Edward Miguel. “The Illusion of Sustainability.” The Quarterly Journal of Economics 122, no. 3 (2007): 1007–1065. link
Liben-Nowell, David, and Jon Kleinberg. “Tracing Information Flow on a Global Scale Using Internet Chain-letter Data.” Proceedings of the National Academy of Sciences 105, no. 12 (2008): 4633–4638. link
D. Creation of ideas
Azoulay, Pierre, Joshua S. Graff Zivin and Jialan Wang. “Superstar Extinction”. The Quarterly Journal of Economics 125, no. 2 (2010): 549-589. link
Borjas, George, Kirk B. Doran. “The Collapse of the Soviet Union and the Productivity of American Mathematicians.” The Quarterly Journal of Economics 127, no. 3 (2012):1143- 1203. link
3. Opinion formation through social learning A. Observational learning
Banerjee, Abhijit V. “A Simple Model of Herd Behavior.” The Quarterly Journal of Economics 107, no. 3 (1992): 797–817. link
*Bikhchandani, Sushil, David Hirshleifer, and Ivo Welch. “A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades.” Journal of Political Economy (1992): 992–1026. link
*Eyster, Erik, and Matthew Rabin. “Naive Herding in Rich-information Settings.”
American Economic Journal: Microeconomics 2, no. 4 (2010): 221–243. link
*———. Rational Observational Learning. Working Paper, 2011. link
Grimm, Veronika, and Friederike Mengel. An experiment on belief formation in net- works. Available at SSRN 2361007 (2013).link
Smith, Lones, and Peter Sorensen. “Pathological Outcomes of Observational Learning.”
Econometrica 68, no. 2 (2000): 371–398. link B. Word-of-mouth learning
*Jackson, Chapters 7-8.
Acemoglu, Daron, Kostas Bimpikis, and Asuman Ozdaglar. “Dynamics of Information Exchange in Endogeneous Social Networks.” Theoretical Economics 9, no. 1 (2014): 41-97.
link
Alatas, Vivi, Abhijit Banerjee, Arun G. Chandrasekhar, Rema Hanna, and Benjamin A. Olken. Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia. National Bureau of Economic Research, 2012. link.
Bala, Venkatesh, and Sanjeev Goyal. “Learning from Neighbours.” The Review of Economic Studies 65, no. 3 (1998): 595–621.link
Campbell, Arthur. “Word-of-mouth communication and percolation in social net- works.“ The American Economic Review 103.6 (2013): 2466-2498.link.
*DeMarzo, Peter M., Dimitri Vayanos, and Jeffrey Zwiebel. “Persuasion Bias, Social Influence, and Unidimensional Opinions.” The Quarterly Journal of Economics 118, no. 3 (2003): 909–968.link
*Golub, Benjamin, and Matthew O. Jackson. “How Homophily Affects the Speed of Learning and Best-response Dynamics.” The Quarterly Journal of Economics 127, no. 3 (2012): 1287–1338. link
*———. “Naive Learning in Social Networks and the Wisdom of Crowds.” American Economic Journal: Microeconomics 2, no. 1 (2010): 112–149. link
Mobius, Markus, Tuan Phan, and Adam Szeidl. Treasure Hunt. working paper, 2010.
link.
Rosenblat, Tanya S., and Markus M. Mobius. “Getting Closer or Drifting Apart?” The Quarterly Journal of Economics 119, no. 3 (2004): 971–1009. link
4. Social capital and trust
*Angelucci, Manuela, and Giacomo De Giorgi. “Indirect Effects of an Aid Program:
How Do Cash Transfers Affect Ineligibles’ Consumption?” The American Economic Review (2009): 486–508. link
*Angelucci, Manuela, Giacomo de Giorgi, and Imran Rasul. “Resource Pooling within Family Networks: Insurance and Investment.” Working paper, 2012. link.
Banerjee, Abhijit V., and Esther Duflo. “Giving Credit Where It Is Due.” The Journal of Economic Perspectives 24, no. 3 (2010): 61–79. link
Carrell, Scott E., Mark Hoekstra, and James E. West. “Racial Preference Formation.“
(2013).link
*Dixit, Avinash. “Trade Expansion and Contract Enforcement.” Journal of Political Economy 111, no. 6 (2003): 1293–1317. link
*Feigenberg, Benjamin, Erica Field, and Rohini Pande. “The Economic Returns to Social Interaction: Experimental Evidence from Microfinance” (2012). Review of Economic Studies, forthcoming. link.
Glaeser, Edward L., David I. Laibson, Jose A. Scheinkman, and Christine L. Soutter.
“Measuring Trust.” The Quarterly Journal of Economics 115, no. 3 (2000): 811–846. link
*Greif, Avner. “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition.” The American Economic Review (1993): 525–548. link
Kandori, Michihiro. “Social Norms and Community Enforcement.” The Review of Economic Studies 59, no. 1 (1992): 63–80. link
Karlan, Dean, Markus M. Mobius, Tanya S. Rosenblat, and Adam Szeidl. “Measuring Trust in Peruvian Shantytowns” (2009). link.
Karlan, Dean, Markus Mobius, Tanya Rosenblat, and Adam Szeidl. “Trust and Social Collateral.” The Quarterly Journal of Economics 124, no. 3 (2009): 1307–1361. link
Munshi, Kaivan, and Mark Rosenzweig. “Networks and Misallocation: Insurance, Mi- gration, and the Rural-Urban Wage Gap.“ Unpublished Manuscript (2013) link
Perez-Truglia, R. (2013), “Conformity Effects and Geographic Polarization: Evidence from an Event-Study Analysis of Residential Mobility in the U.S.“. Working paper. link
5. Labor markets
*Jackson, Chapter 10.2.
*Beaman, Lori A. “Social Networks and the Dynamics of Labour Market Outcomes:
Evidence from Refugees Resettled in the US.” The Review of Economic Studies 79, no. 1 (2012): 128–161. link
*Calvo-Armengol, Antoni, and Matthew O. Jackson. “The Effects of Social Networks on Employment and Inequality.” The American Economic Review 94, no. 3 (2004): 426–454.
link
Granovetter, Mark. Getting a Job: A Study of Contacts and Careers. University of Chicago Press, 1995. link.
*Granovetter, Mark S. “The Strength of Weak Ties.” American Journal of Sociology (1973): 1360–1380. link
Kramarz, Francis, and Oskar Nordstr¨om Skans. “When Strong Ties are Strong: Net- works and Youth Labour Market Entry.“ The Review of Economic Studies (2014): rdt049.link
Montgomery, James D. “Social Networks and Labor-market Outcomes: Toward an Economic Analysis.” The American Economic Review 81, no. 5 (1991): 1408–1418. link
Munshi, Kaivan. “Networks in the Modern Economy: Mexican Migrants in the US Labor Market.” The Quarterly Journal of Economics 118, no. 2 (2003): 549–599. link
Topa, Giorgio. “Social Interactions, Local Spillovers and Unemployment.” The Review of Economic Studies 68, no. 2 (2001): 261–295. link
6. Favoritism and political connections
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. “Social Connections and Incen- tives in the Workplace: Evidence from Personnel Data.” Econometrica 77, no. 4 (2009):
1047–1094. link
Blanes i Vidal, Jordi, Mirko Draca, Christian Fons-Rosen. “Revolving Door Lobbyists.”
American Economic Review 102, no. 3 (2010): 3731-3748. link
*Bramoulle Yann, and Sanjeev Goyal. “Favoritism” (2012).link
*Ferguson, Thomas, and Hans-Joachim Voth. “Betting on Hitler—the Value of Political Connections in Nazi Germany.” The Quarterly Journal of Economics 123, no. 1 (2008):
101–137. link
*Fisman, Raymond. “Estimating the Value of Political Connections.” The American Economic Review 91, no. 4 (2001): 1095–1102. link
Khwaja, Asim Ijaz, and Atif Mian. “Do Lenders Favor Politically Connected Firms?
Rent Provision in an Emerging Financial Market.” The Quarterly Journal of Economics 120, no. 4 (2005): 1371–1411. link
7. Firm networks
*Acemoglu, Daron, Vasco M. Carvalho, Asuman Ozdaglar, and Alireza Tahbaz-Salehi.
“The Network Origins of Aggregate Fluctuations.” Econometrica 80, no. 5 (2012): 1977–2016.
link
Acemoglu, Daron, Asuman Ozdaglar, and Alireza Tahbaz-Salehi. The Network Origins of Large Economic Downturns. National Bureau of Economic Research, 2013. link.
Atkin, David, et al. “Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan.“ link
*Burchardi, Konrad B., and Tarek A. Hassan. “The Economic Impact of Social Ties:
Evidence from German Reunification.” The Quarterly Journal of Economics 128, no. 3 (2013): 1219–1271. link
Carvalho, V., Makoto Nirei, and Yukiko U. Saito. “Supply Chain Disruptions: Evidence from Great East Japan Earthquake.” mimeo, 2013.link
Cohen, Lauren, Umit G. Gurun, and Christopher J. Malloy. “Resident networks and firm trade.” No. w18312. National Bureau of Economic Research, 2012.link
Greenstone, Michael, Richard Hornbeck, Enrico Moretti. “Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings.” Journal of Polit- ical Economy 118, vol. 3 (2010):536-598.link
Oberfield, Ezra. “Business networks, production chains, and productivity: A theory of input-output architecture.” No. 2011-12. Working paper, Federal Reserve Bank of Chicago, 2011.link
8. Financial networks
*Acemoglu, Daron, Asuman Ozdaglar, and Alireza Tahbaz-Salehi. Systemic risk and stability in financial networks. No. w18727. National Bureau of Economic Research, 2013 link.
Allen, Franklin, Ana Babus, and Elena Carletti. Financial Connections and Systemic Risk. National Bureau of Economic Research, 2010. link.
*Allen, Franklin, and Douglas Gale. “Financial Contagion.” Journal of Political Econ- omy 108, no. 1 (2000): 1–33. link
Babus, Ana, and P´eter Kondor. “Trading and information diffusion in over-the-counter markets.” Working paper, Imperial College and Central European University, 2013.link.
Caballero, Ricardo J., and Alp Simsek. “Fire sales in a model of complexity.“ The Journal of Finance 68.6 (2013): 2549-2587.link.
Cifuentes, Rodrigo, Gianluigi Ferrucci, and Hyun Song Shin. “Liquidity Risk and Con- tagion.” Journal of the European Economic Association 3, no. 2–3 (2005): 556–566. link
*Elliott, Matthew, Benjamin Golub, and Matthew O. Jackson. “Financial Networks and Contagion.” Working paper, 2013. link.
Zawadowski, Adam. “Entangled Financial Systems.” Review of Financial Studies 26, no. 5 (2013): 1291–1323. link
9. Network formation: evidence and random graph models
*Jackson, Chapters 4-5.
Albert, Reka, and Albert-Laszlo Barabasi. “Statistical Mechanics of Complex Net- works.” Reviews of Modern Physics 74, no. 1 (2002): 47. link
Allcott, by Hunt, Dean Karlan, Markus M. Mobius, Tanya S. Rosenblat, and Adam Szeidl. “Community Size and Network Closure.” The American Economic Review 97, no.
2 (2007): 80–85. link
Chandrasekhar, Arun, and Matthew O. Jackson. Tractable and Consistent Random Graph Models. SSRN Working paper, 2012. link.
*Currarini, Sergio, Matthew O. Jackson, and Paolo Pin. “An Economic Model of Friendship: Homophily, Minorities, and Segregation.” Econometrica 77, no. 4 (2009):
1003–1045. link
Currarini, Sergio, Matthew Jackson, and Paolo Pin. “Identifying the Roles of Choice and Chance in Network Formation: Racial Biases in High School Friendships.” Proceedings of the National Academy of Sciences 107 (2010): 4857–4861. link
Goldsmith-Pinkham, Paul, and Guido W. Imbens. “Social networks and the identifi- cation of peer effects.“ Journal of Business & Economic Statistics 31.3 (2013): 253-264..
link.
*Jackson, Matthew O., and Brian W. Rogers. “Meeting Strangers and Friends of Friends: How Random Are Social Networks?” The American Economic Review (2007):
890–915. link
Marmaros, David, and Bruce Sacerdote. “How Do Friendships Form?” The Quarterly Journal of Economics 121, no. 1 (2006): 79–119. link
Watts, Duncan J., and Steven H. Strogatz. “Collective Dynamics of ‘small-world’networks.”
Nature 393, no. 6684 (1998): 440–442. link
10. Network formation: strategic models
*Jackson, Chapter 6.
Bala, Venkatesh, and Sanjeev Goyal. “A Noncooperative Model of Network Formation.”
Econometrica 68, no. 5 (2000): 1181–1229. link
*Galeotti, Andrea, and Sanjeev Goyal. “The Law of the Few.” The American Economic Review 100, no. 4 (2010): 1468–1492. link
Hojman, Daniel A., and Adam Szeidl. “Core and Periphery in Networks.” Journal of Economic Theory 139, no. 1 (2008): 295–309. link
*Jackson, Matthew O., and Asher Wolinsky. “A Strategic Model of Social and Economic Networks.” Journal of Economic Theory 71, no. 1 (1996): 44–74. link
Konig, Michael, Claudio Tessone, and Yves Zenou. “Nestedness in Networks: A Theo- retical Model and Some Applications” 2013, Theoretical Economics, forthcoming. (2009).
link.
11. Network games
*Jackson, Chapter 9.
*Galeotti, Andrea, Sanjeev Goyal, Matthew O. Jackson, Fernando Vega-Redondo, and Leeat Yariv. “Network Games.” The Review of Economic Studies 77, no. 1 (2010):
218–244. link
Jackson, Matthew, and Yves Zenou. “Games on Networks.” Forthcoming: Handbook of Game Theory, Vol. 4. (2012). link.
12. Trading in networks
Choi, Syngjoo, Andrea Galeotti, and Sanjeev Goyal. “Trading in Networks: Theory and Experiments.“ (2014).link.
Dell, Melissa. “Trafficking networks and the mexican drug war.“ Unpublished manuscript, MIT (2011).link
Donaldson, Dave. Railroads of the Raj: Estimating the impact of transportation in- frastructure. No. w16487. National Bureau of Economic Research, 2010.link
Faber, Benjamin. “Trade Integration, Market Size, and Industrialization: Evidence from China’s National Trunk Highway System*.“ The Review of Economic Studies (2014):
rdu010.link
Kranton, Rachel E., and Deborah F. Minehart. “A Theory of Buyer-seller Networks.”
American Economic Review 91, no. 3 (2001): 485–508. link
