Working Papers

5. “Endogenous Social Networks and Inequality in an Intergenerational Setting.” May 24, 2015. PDF. Human Capital and Economic Opportunity Global Working Group paper 2015-012.

Abstract. In a world where individuals interact in myriads of ways, one wonders how the benefits of one’s connections with others compare with those conferred by individual characteristics when it comes to acquisition of human capital. It is particularly interesting to be able to distinguish between connections that are the outcome of deliberate decisions by individuals and connections being given exogenously and beyond an individual’s control. The paper explores the consequences of the joint evolution of social connections and human capital investments. It thus allows one to study a broad range of possibilities in which social connections may influence inequality in consumption, human capital investment and welfare across the members of the economy, cross-sectionally and intertemporally. It embeds inequality analysis in models of endogenous social network formation. The novelty of the model lies in its joint treatment of human capital investment and social network formation in intergenerational settings, while distinguishing between the case of impact on human capital from endogenous as opposed to exogenous social networking. Among several results in the case of exogenous connections, we demonstrate conditions under which the limit distribution of human capital has a Pareto upper tail.

We develop allow for intergenerational transfers in a dynastic version of the infinite horizon Ramsey-Cass-Koopmans model and of overlapping-generations models. Thus, intergenerational transfers of both human capital endowments and social networking endowments are jointly determined. When social connections are not optimized, individuals’ human capital reflect a much more general dependence on social connections, which does not reduce to aggregate statistics of social connections. For the overlapping generations model, the elasticity of the intergenerational transfer received by an individual is increasing in the intergenerational transfer received by the parent, exhibits rich dependence on social effects, and is positive and less than 1. We show that the dynamics of demographically increasingly complex models, as expressed by a sequence of models with increasing number of overlapping-generations, depend on the product of the adjacency matrices associated with each of the overlapping generations.

 

4. “Ubiquitous Digital Technologies and Spatial Structure: An Update.” With Emmanouil Tranos. August. 2015. Revised. April 6 2017. PDF

Abstract. This paper tests whether the internet and communication technologies have offset agglomeration benefits and led to more dispersed spatial structures or enhanced urban externalities and resulted in more concentrated spatial systems. Both empirical and theoretical studies have researched this question, but (i) revealed opposing findings, (ii) were based on assumptions about technological capabilities which do not necessarily hold today, and/or (ii) used data from times before digital technologies reached the current maturity level.
We address these issues by estimating a multi-country model which tests the effect of digital technologies on Zipf coefficients using recent data. Then, we focus on the US and the UK, for which we obtained novel data, to test whether such effects exist for smaller cities which were not included in our global data. The results, which appear to be robust against endogeneity, illustrate a complementary relationship between the internet, mobile and fixed telephony and agglomeration externalities.

 

 

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INACTIVE WORKING PAPERS

3. “Why Productivity Enhancing Reforms Will Help Greece Exit the Crisis and Usher in Long Run Growth.” January 24, 2015. PDF.

Abstract.  The paper first assesses various ideas about getting growth started, and what might be hampering that. It also details what we could expect in the way of productivity growth when reforms currently envisioned and hopefully in progress are brought to fruition. The discussion draws extensively from the case of the Finnish Great Depression, an episode that all things considered is quite similar to the Greek crisis, which could well justify the term Greek Great Depression. It was precipitated by the shock of the collapse of the Soviet Union, Finland’s greatest trading partner at the time, but was also accompanied by a banking and credit crisis. It was followed by an admirable period of economic growth, which I find a rich source of lessons for the Greek crisis. The paper details growth-hampering features of the Greek educational system and discusses in depth growth-enhancing properties of market deregulation. Small improvements in each of many markets and industries can add up to significant contributions to Greece’s total factor productivity growth performance. Second, in the immediate aftermath of fiscal stabilization, the problem of the Greek trade deficit, which some consider as the principal cause of the crisis remains acute. The considerable improvement in unit labor costs that has taken place has not been followed by a commensurate improvement in the trade deficit. Recapturing and realizing gains in foreign markets is in part a problem that Greece shares with other “peripheral” EU countries, and to a degree not sufficiently appreciated and widely discussed. Real appreciation of the euro appears to be mainly due nominal exchange rate appreciation rather than domestic costs (measured via either unit labor costs or the consumer price index). This in turn suggests that in order for Greece to improve its advantage in international markets it needs to accelerate its effort at productivity improvements and just as much at growth-enhancing product market reforms.

2. “Searching for the Best Neighborhood: Mobility and Social Interactions,” with Giulio Zanella, April 2008. PDF Under revision.

Abstract.  The paper seeks to contribute to the social interactions literature by exploiting data on individuals’ self-selection into neighborhoods. We study a model in which households search for the best location in the presence of neighborhood effects in the formation of children’s human capital and in the process of cultural transmission. We use micro data from the PSID which we have merged, using geocodes, with contextual information at the levels of census tracts and of counties from the 2000 US Census. We control for numerous individual characteristics and neighborhood attributes and find, consistently with neighborhood effects models, that households with children, but not those without, are more likely to move out of neighborhoods whose attributes are not favorable to the production of human capital and the transmission of parents’ cultural traits, and to move into neighborhoods which instead exhibit desirable such attributes.

1. “Random Graphs and Social Networks: An Economics Perspective,” Revised June 2015. PDF

Abstract. This review of current research on networks emphasizes three strands of the literature on social networks. The first strand is composed of models of endogenous network formation from both the economics and the computer science literature. The review highlights the sensitive dependence of the topology of endogenous networks on parameters of the behavioral models employed. The second strand draws from the recent econophysics literature in order to review the recent revival of interest in the random graph theory. This mathematical tool allows one to study social networks that result from uncoordinated random action of individuals in setting up connections with others. The review explores a number of examples to assess the potential of recent research on random graphs with arbitrary degree distributions in accommodating more general behavioral motivations for social network formation. The third strand focuses on a specific model of social networks, Markov random graphs,  that is quite central in the mathematical sociology and spatial statistics literatures but little known outside those literatures. These are random graphs where the events that different edges are present are dependent, if edges are incident to the same node, and   independent, otherwise. The paper assesses the potential for economic applications with this particular tool. The paper concludes with an assessment  of observable consequences of optimizing behavior in networks for the purpose of estimation.