Working Paper: NBER ID: w26577
Authors: Bryan S. Graham
Abstract: Many economic activities are embedded in networks: sets of agents and the (often) rivalrous relationships connecting them to one another. Input sourcing by firms, interbank lending, scientific research, and job search are four examples, among many, of networked economic activities. Motivated by the premise that networks' structures are consequential, this chapter describes econometric methods for analyzing them. I emphasize (i) dyadic regression analysis incorporating unobserved agent-specific heterogeneity and supporting causal inference, (ii) techniques for estimating, and conducting inference on, summary network parameters (e.g., the degree distribution or transitivity index); and (iii) empirical models of strategic network formation admitting interdependencies in preferences. Current research challenges and open questions are also discussed.
Keywords: network econometrics; dyadic regression; network formation; causal inference
JEL Codes: C1; C23; C25; C31; D85
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| interbank lending networks (F65) | financial system's vulnerability to large shocks (F65) |
| network structures (D85) | economic stability (E63) |
| interdependencies in preferences among agents (D10) | inefficient network structures (D85) |
| social networks (Z13) | disparities in outcomes (racial inequality) (I14) |