Economic and social networks
Syllabus, Fall 2016
Department of Economics, Central European University
usually Tuesday 3:30-5:30pm
2 Credits
personal.ceu.edu/staff/Adam_Szeidl/networkscourse/networkscourse.htm
Instructor: Professor Adam Szeidl
[email protected]
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 presentations. 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
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papers in this field. (4) Sufficient understanding of open issues to formulate a new research
question in this field.
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 Multiplier.” 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 Problem.” 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
Angrist, Joshua D. “The perils of peer effects.“ Labour Economics, 30: 98-108. (2014).link
B. Education and the workplace
Bandiera, Oriana, Iwan Barankay, and Imran Rasul. “Social Incentives in the Workplace.” 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
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*Carrell, Scott E., B. I. Sacerdote, and James E. West. “From Natural Variation to
Optimal Policy? The Importance of Endogenous Peer Group Formation.” Econometrica
81, no. 3 (2012).: 855-882 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.
*Banerjee, Abhijit V., et al. “Gossip: Identifying central individuals in a social network.“ Available at SSRN 2425379 (2014).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.” American Economic Journal: Applied Economics 7, no. 4 (2015): 81-108. 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.“ American 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
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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):11431203. 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 networks. Available at SSRN 2361007 (2014).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. American Economic Review 106, no. 7 (2016): 1663-1704. 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 networks.“ 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
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(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, 2015.
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, 2015. 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
*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 80, no.4 (2012): 1459-1483.. 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
*Perez-Truglia, R. (2016), “Political Conformity: Event-Study Evidence from the United
States“. 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
5
(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 Nordström Skans. “When Strong Ties are Strong: Networks and Youth Labour Market Entry.“ The Review of Economic Studies 80, no. 3 (2014):
1164-1200.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
Munshi, Kaivan, and Mark Rosenzweig. “Networks and Misallocation: Insurance, Migration, and the Rural-Urban Wage Gap.“ American Economic Review 106, no. 1., (2016):
46-98. 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 Incentives in the Workplace: Evidence from Personnel Data.” Econometrica 77, no. 4 (2009):
1047–1094. link
Bertrand, Marianne, Matilde Bombardini, and Francesco Trebbi. “Is It Whom You
Know or What You Know? An Empirical Assessment of the Lobbying Process.“ American
Economic Review 104. no. 12 (2014): 3885-3920.link
Bertrand, Marianne, et al. “Politicians, firms and the political business cycle: evidence
from France.” Unpublished working paper. University of Chicago (2006).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” Journal of Development Economics
122 (2012): 16-27.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
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*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
* Mironov, Maxim, and Ekaterina Zhuravskaya. “Corruption in Procurement: Evidence
from Financial Transactions Data” American Economic Journal: Economic Policy 8, no. 2
(2016): 287-321. 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.” working paper (2016). link
Atkin, D, Khandelwal, A and Osman, A. 2016. ’Exporting and Firm Performance:
Evidence from a Randomized Trial’. London, Centre for Economic Policy Research.link
Braggion, Fabio. “Managers and (Secret) social networks: the influence of the freemasonry on firm performance.” Journal of the European Economic Association 9.6 (2011):
1053-1081.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, 2014.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 Political Economy 118, vol. 3 (2010):536-598.link
*Oberfield, Ezra. “Business networks, production chains, and productivity: A theory
of input-output architecture.” (2013).link
8. Financial networks
*Acemoglu, Daron, Asuman Ozdaglar, and Alireza Tahbaz-Salehi. Systemic risk and
stability in financial networks. American Economic Review, 105(2): 564-608. 2015 link.
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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 Economy 108, no. 1 (2000): 1–33. link
Babus, Ana, and Péter Kondor. “Trading and information diffusion in over-the-counter
markets.” Working paper, 2016.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 Contagion.” Journal of the European Economic Association 3, no. 2–3 (2005): 556–566. link
*Elliott, Matthew, Benjamin Golub, and Matthew O. Jackson. (2014) “Financial Networks and Contagion.” American Economic Review, 104(10): 3115-53. 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 Networks.” 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
*Carrell, Scott E., Mark Hoekstra, and James E. West. “Racial Preference Formation.“
(2013).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 identification of peer effects.“ Journal of Business & Economic Statistics 31.3 (2013): 253-264..
link.
*Graham, Bryan S. “Methods of Identification in Social Networks.“ Annual Review of
Economics 7.1 (2014).link
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*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 Theoretical Model and Some Applications” 2013, Theoretical Economics 9, no. 3 (2013):
695?752. 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.“ American Economic
Review 105, no. 6 (2015): 1738-79. link
*Donaldson, Dave. Railroads of the Raj: “Estimating the impact of transportation
infrastructure.“ American Economic Review, forthcoming. link
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Faber, Benjamin. “Trade Integration, Market Size, and Industrialization: Evidence
from China’s National Trunk Highway System*.“ The Review of Economic Studies 81, no.
3 (2014): 1046-1070. link
Kranton, Rachel E., and Deborah F. Minehart. “A Theory of Buyer-seller Networks.”
American Economic Review 91, no. 3 (2001): 485–508. link
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