Modeling the International-Trade Network: a gravity approach

We investigate whether the gravity model (GM) can explain the statistical properties of the International Trade Network (ITN). We fit data on trade flows with a GM using alternative estimation techniques and we build GM-based predictions for the weighted topological properties of the ITN, which are then compared to the observed ones. Our exercises show that the GM: (i) may replicate part of the weighted-network structure only if the observed binary architecture is kept fixed; (ii) is not able to explain higher-order statistics that, like clustering, require the knowledge of triadic link-weight topological patterns, even if the binary structure perfectly replicates the observed one; (iii) performs very badly when asked to predict the presence of a link, or the level of the trade flow it carries, whenever the binary structure must be simultaneously estimated.     

我国国内航空货运航线网络结构的实证分析

为了全面分析我国航空货运航线网络结构的现状,准确把握航空货运航线网络结构中存在的问题,本文运用统计分析和网络拓扑分析的方法,对我国国内航空货运样本航段的运量进行分析,计算结果显示:我国航空货运枢纽与客运枢纽具有高度叠加性,货运枢纽较客运枢纽更为显著;我国航空货运航线网络中的机场层次更加丰富;2007年航线网络的便利性较2002年有所提高;目前我国国内航空货运航线网络仍以城市对式航线网络结构为主,但也存在不均衡发展、多结构共存的现象。     

Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry

This study explores the importance of cross‐border social networks for entrepreneurs in developing countries by examining ties between the Indian expatriate community and local entrepreneurs in India's software industry. We find that local entrepreneurs who have previously lived outside India rely significantly more on diaspora networks for business leads and financing. This is especially true for entrepreneurs who are based outside software hubs—where getting leads to new businesses and accessing finance is more difficult. Our results provide micro‐evidence consistent with a view that cross‐border social networks play an important role in helping entrepreneurs to circumvent the barriers arising from imperfect domestic institutions in developing countries.     

A stochastic frontier model with correction for sample selection

Heckman’s (Ann Econ Soc Meas 4(5), 475–492, 1976; Econometrica 47, 153–161, 1979) sample selection model has been employed in three decades of applications of linear regression studies. This paper builds on this framework to obtain a sample selection correction for the stochastic frontier model. We first show a surprisingly simple way to estimate the familiar normal-half normal stochastic frontier model using maximum simulated likelihood. We then extend the technique to a stochastic frontier model with sample selection. In an application that seems superficially obvious, the method is used to revisit the World Health Organization data (WHO in The World Health Report, WHO, Geneva 2000; Tandon et al. in Measuring the overall health system performance for 191 countries, World Health Organization, 2000) where the sample partitioning is based on OECD membership. The original study pooled all 191 countries. The OECD members appear to be discretely different from the rest of the sample. We examine the difference in a sample selection framework.     

Global networks of trade and bits

Considerable efforts have been made in recent years to produce detailed topologies of the Internet, but so far these data have been overlooked by economists. In this paper, we suggest that such information could be used to characterize both the size of the digital economy and outsourcing at country level. We analyse the topological structure of the network of trade in digital services (trade in bits) and compare it with the more traditional flow of manufactured goods across countries. To perform meaningful comparisons across networks with different characteristics, we define a stochastic benchmark for the number of connections among each country-pair, based on hypergeometric distribution. Original data are filtered so that we only focus on the strongest, i.e. statistically significant, links. We find that trade in bits displays a sparser and less hierarchical network structure, which is more similar to trade in high-skill manufactured goods than total trade. Moreover, distance plays a more prominent role in shaping the network of international trade in physical goods than trade in digital services.     

Volatility spillovers among the U.S. and Asian stock markets: A comparison between the periods of Asian currency crisis and subprime credit crisis

This paper examines the changing nature of volatility spillovers among the U.S. and eight East Asian stock markets between two financial crises: the Asian currency crisis and the U.S. subprime credit crisis. Our empirical results suggest that volatility is not always spilled over from the directly affected markets to surrounding markets in crisis periods. The East Asian markets who directly suffered from the Asian currency crisis are the ones to which volatility is spilled over from other markets during the Asian currency crisis period, whereas uni-directional volatility spillovers from the U.S. market to other markets are observed during both crisis periods. This difference can be explained by a pre-determined hierarchy in which volatility spillovers tend to start from the U.S. market regardless of the geographical origin of the crisis. Furthermore, our results reveal that the markets in three major Asian financial hubs, i.e., Japan, Hong Kong and Singapore, are the markets to which volatility is spilled over uni-directionally from several other countries during the subprime credit crisis period, but not during the Asian currency crisis period. We attribute this difference to crisis-specific (currency or credit crisis), market-specific (credit derivatives market participation and foreign currency reserves), and time-specific (more integrated global market) factors.     

The Morishima gross elasticity of substitution

We show that the Hotelling–Lau elasticity of substitution, an extension of the Allen–Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen–Uzawa elasticity identified by Blackorby and Russell [(1989) Am Econ Rev 79: 882–888]. An analogous extension of the Morishima elasticity of substitution to allow for output quantity changes preserves the salient properties of the original Hicksian notion of elasticity of substitution. We thank Paolo Bertoletti for drawing our attention to the issue addressed in this paper and for his comments on an earlier draft.     

Airline consolidation and the distribution of traffic between primary and secondary hubs

Several airline consolidation events have recently been completed both in Europe and in the United States. The model we develop considers two airlines operating hub-and-spoke networks, using different hubs to connect the same spoke airports. We assume the airlines to be vertically differentiated, which allows us to distinguish between primary and secondary hubs. We conclude that this differentiation in air services becomes more accentuated after consolidation, with an increased number of flights being channeled through the primary hub. However, congestion can act as a brake on the concentration of flight frequency in the primary hub following consolidation. Our empirical application involves an analysis of Delta's network following its merger with Northwest. We find evidence consistent with an increase in the importance of Delta's primary hubs at the expense of its secondary airports. We also find some evidence suggesting that the carrier chooses to divert traffic away from those hub airports that were more prone to delays prior to the merger, in particular New York's JFK airport.     

The mean residual of record values at the level of previous records

In the study of reliability of the technical systems, records model plays an important role. Suppose that a technical system is subject to shocks, e.g. peaks of voltages or stresses. The successive large shocks may be viewed as realizations of records from a sequence of identically independent voltages. Assume that the lower limit value of the mth record voltage (stress) is v > 0. Under these conditions, we propose a mean residual of records (MRR’s) for the future records. We study several properties of MRR. We show that the proposed MRR uniquely characterizes the distribution function that generated the sequence of records. It is proved that when the model under study has an increasing hazard rate the corresponding MRR is decreasing. We also compare between two record systems based on their MRR’s when these systems are ordered in terms of their hazard rates.     

Self-organization of R&D search in complex technology spaces

We extend an earlier model of innovation dynamics based on percolation by adding endogenous R&D search by economically motivated firms. The {0, 1} seeding of the technology lattice is now replaced by draws from a lognormal distribution for technology ‘difficulty’. Firms are rewarded for successful innovations by increases in their R&D budget. We compare two regimes. In the first, firms are fixed in a region of technology space. In the second, they can change their location by myopically comparing progress in their local neighborhoods and probabilistically moving to the region with the highest recent progress. We call this the moving or self-organizational regime (SO). The SO regime always outperforms the fixed one, but its performance is a complex function of the ‘rationality’ of firm search (in terms of search radius and speed of movement). The clustering of firms in the SO regime grows rapidly and then fluctuates in a complex way around a high value that increases with the search radius. We also investigate the size distributions of the innovations generated in each regime. In the fixed one, the distribution is approximately lognormal and certainly not fat tailed. In the SO regime, the distributions are radically different. They are much more highly right skewed and show scaling over at least 2 decades with a slope around one, for a wide range of parameter settings. Thus we argue that firm self-organization leads to self-organized criticality. The online version of the original article can be found under doi:.     

Topological properties of reconstructed credit networks and banking systemic risk

Financial bipartite networks provide channels for contagion risks and their topological properties determine financial stability. We enrich the bipartite network reconstruction methods proposed by Ramadiah et al. (2020) and extend them to the Chinese banking system. By comparing the reproducibility of the real credit market and the corresponding systemic risk, the impact of topological properties for different reconstructed bipartite networks on financial stability is analyzed. The empirical evidence shows that network reconstruction methods based on maximum entropy ensembles capture more properties in the real credit network. It also highlights that the different systemic risk level is mainly contributed by the topological properties based on common exposures. These analyses for topological properties provide regulatory insights for systemic risk prevention. It shows that reducing credit similarity across banks while increasing credit diversification in different sectors helps to control systemic risk. The results imply the possibility of increasing financial stability through the macro-regulation of the credit market structure.     

THE CREATION AND DIFFUSION OF INNOVATION IN DEVELOPING COUNTRIES: A SYSTEMATIC LITERATURE REVIEW

In this study, we review the literature on the creation and diffusion of innovation in the private sectors (industry and services) in developing countries. In particular, we collect evidence on what are the barriers to innovation creation and diffusion and the channels of innovation diffusion to and within developing countries. We find that innovation in developing countries is about creation or adoption of new ideas and technologies; but the capacity for innovation is embedded in and constituted by dynamics between geographical, socio‐economic, political and legal subsystems. We contextualize the findings from the review in the current theoretical framework of diffusion of innovations, and we emphasize how the institutional context typical of developing countries impacts the diffusion itself.     

What Drives Oil Prices? Emerging Versus Developed Economies

We explore the role of demand from emerging and developed economies as drivers of the real price of oil. Using a FAVAR model that identifies shocks from different regions of the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the fluctuations in the real oil price and in oil production. Furthermore, geographical regions respond differently to adverse oil market shocks that drive up oil prices, with Europe and North America being more negatively affected than countries in Asia and South America. Copyright © 2014 John Wiley & Sons, Ltd.     

Mean square error estimation in multi-stage sampling

Summary: Suppose for a homogeneous linear unbiased function of the sampled first stage unit (fsu)-values taken as an estimator of a survey population total, the sampling variance is expressed as a homogeneous quadratic function of the fsu-values. When the fsu-values are not ascertainable but unbiased estimators for them are separately available through sampling in later stages and substituted into the estimator, Raj (1968) gave a simple variance estimator formula for this multi-stage estimator of the population total. He requires that the variances of the estimated fsu-values in sampling at later stages and their unbiased estimators are available in certain `simple forms'. For the same set-up Rao (1975) derived an alternative variance estimator when the later stage sampling variances have more ‘complex forms’. Here we pursue with Raj's (1968) simple forms to derive a few alternative variance and mean square error estimators when the condition of homogeneity or unbiasedness in the original estimator of the total is relaxed and the variance of the original estimator is not expressed as a quadratic form.  We illustrate a particular three-stage sampling strategy and present a simulation-based numerical exercise showing the relative efficacies of two alternative variance estimators. Received: 19 February 1999     

C. Van Tuyckom, & K. J?reskog, “Going for gold! Welfare characteristics and Olympic success: an application of the structural equation approach.” Quality & Quantity (in press)

Winning medals at the Olympic Games has become an objective that countries worldwide want to achieve. In line with research devoted to the predictors of success, the present article examines the connection between certain welfare characteristics (political, social, and economic development) and the probability of success in the 1984 and 2004 Olympics. We expected to find that structural macro conditions still predict Olympic success. Using welfare indicators as formative instead of reflective indicators (Bollen, Qual Quant 183: 77–85, 1984, p. 65), the results of our Structural Equation Model reveal that both economic and social development had an effect in 1984, as well as in 2004. Political development was only significant in 1984. As for the control variables, population size was significant in both 1984 and 2004. Sporting tradition and geographical conditions had no effect at all. The model fit is very good with a chi-square of 6.62 with 5 degrees of freedom (p =  0.25).     

Mean residual life functions of finite mixtures,order statistics and coherent systems

We study properties of the mean residual life functions of finite mixtures. Specifically, we study ordering properties, monotonicity and the limiting behaviour. We show, under some mild conditions, that the limiting behaviour is similar to that of the strongest member (in the mean residual life order) of the mixture. We also consider the case of negative mixtures (i.e., mixtures with some negative coefficients) which is applied to study the behaviour of the mean residual life of order statistics and coherent systems with possibly dependent components. Partially Supported by Ministerio de Ciencia y Tecnologí a under grant BFM2003-02947 and Fundación Séneca under grant 00698/PI/04.     

The next Silicon Valley? On the relationship between geographical clustering and public policy

Inspired by the success of geographical clustering in California, many governments pursue cluster policy in the hope to build the next Silicon Valley. In this paper we critically assess the relationship between geographical clustering and public policy. With the help of a range of theoretical insights and case study examples we show that cluster policy in fact is a risky\ venture, especially when it is tried to copy the success of regional ‘best practices’. Therefore, we advice policy makers to move away from the Silicon Valley model and to modestly start from a place-specific approach of ‘Regional Realism’.     

Comparative evaluation of community-aware centrality measures

Influential nodes play a critical role in boosting or curbing spreading phenomena in complex networks. Numerous centrality measures have been proposed for identifying and ranking the nodes according to their importance. Classical centrality measures rely on various local or global properties of the nodes. They do not take into account the network community structure. Recently, a growing number of researches have shifted to community-aware centrality measures. Indeed, it is a ubiquitous feature in a vast majority of real-world networks. In the literature, the focus is on designing community-aware centrality measures. However, up to now, there is no systematic evaluation of their effectiveness. This study fills this gap. It allows answering which community-aware centrality measure should be used in practical situations. We investigate seven influential community-aware centrality measures in an epidemic spreading process scenario using the Susceptible–Infected–Recovered model on a set of fifteen real-world networks. Results show that generally, the correlation between community-aware centrality measures is low. Furthermore, in a multiple-spreader problem, when resources are available, targeting distant hubs using Modularity Vitality is more effective. However, with limited resources, diffusion expands better through bridges, especially in networks with a medium or strong community structure.

     

On the cointegration of international stock indices

This paper investigates the cointegration relationship among a group of international stock indices in light of new developments of econometric methods. Kasa (1992) first documented strong evidence for cointegration relations among five national stock indices, which suggests that there exists a common trend among those stock indices. Using Johansen multivariate cointegration test, we find that his findings are persistent in a sample of longer periods and more countries. In order to investigate whether these results are driven by statistical biases related to the sample size, we apply to our tests the Johansen’s small sample correction factor. The results still point toward the existence of a cointegration relationship but the evidence becomes much weaker. We next examine the empirical patterns emerged from different lag specifications and argue that Kasa’s findings are more likely due to the size distortion in extreme long lag VAR models. Indeed, when we employ a newly developed non-parametric test that does not require estimation VAR models, the null hypothesis of no cointegration cannot be rejected for the original sample of Kasa’s five-country stock indices from 1974 to 1990, nor for the extended period from 1970 to 2003.     

Analyzing quantile spillover effects among international financial markets

This paper investigates the quantile-based spillover effects among 17 stock markets from January 1993 to January 2022, utilizing a quantile approach based on the variance decomposition of a quantile vector autoregression (QVAR) model. Compared with the traditional mean-based spillover measures, this new quantile approach allows for a nuanced investigation of spillovers at every quantile and capture spillovers under extreme events. The results show that: (1) the total spillover is high and exhibits strong time-varying characteristics, and the tail spillover is higher and more complex in scale and direction; (2) the spillover at each quantile level shows an upward trend, especially during the 2008 crisis and the COVID-19 epidemic; (3) developed countries (or regions) are the net exporters of stock market spillovers, while the developing countries are the net importers; and (4) the 17 stock markets constitute different local financial networks, which may be related to economic conditions and geographical location.