Economic Networks

Last update: 13 Apr 2025 08:30
First version: 12 April 2025

Production/consumption networks: What one economic entity produces, another consumes; this defines a (directed) graph between entities. At the level of industries, this is input-output analysis. At the level of plants or establishments, there isn't (I think) a settled name for the topic; nor is there at the level of firms. Interestingly, while the firm-level network and the industry-level network are both aggregations of the plant-level network, they are not necessarily nested, because there are firms which are active across multiple industries...

Other sorts of economic networks: buyers and sellers who coordinate through exchanges or brokers (a bipartite graph, or tripartite if buyers and sellers are distinct); choice of technology (keyboard layout, operating system, language...) where utility depends on the size of the network of other adopters (at least in part); credit provision in finance; corporate boards (historically, the first topic of network analysis in the social sciences, back in the late 1800s).

The borders between all these kinds of thing and social networks is fuzzy, so have a link.

Queries: To what extent can macroeconomic fluctuations (i.e., the business cycle) be understood as the result of the network structure of the economy? Can one explain Slutsky-style moving average dynamics as the result of shocks propagating through the network? (I'm sure people have actually worked out stuff like this, or worked out why it's not right, rather than merely having idle thoughts, I just haven't read it yet.) --- Immediately after first posting this, reader RC provided some pointers to the literature, now incorporated below.

David Easley and Jon Kleinberg, Networks, Crowds, and Markets: Reasoning about a Highly Connected World
Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility
Thomas Oatley, W. Kindred Winecoff, Andrew Pennock and Sarah Bauerle Danzman, "The Political Economy of Global Finance: A Network Model", Perspectives on Politics 11 (2013): 133--153
Walter W. Powell, Douglas R. White, Kenneth W. Koput, and Jason Owen‐Smith, "Network Dynamics and Field Evolution: The Growth of Interorganizational Collaboration in the Life Sciences", American Journal of Sociology 110 (2005): 1132--1205
Piero Sraffa, Production of Commodities by Means of Commodities

Daron Acemoglu, Asuman Ozdaglar, and Alireza Tahbaz-Salehi, "Cascades in Networks and Aggregate Volatility", NBER Working Paper 16516 (2010) [PDF preprint]
Enghin Atalay, Ali Hortaçsu, James Roberts, and Chad Syverson, "Network structure of production", Proceedings of the National Academy of Sciences (USA) 108 (2011): 5199--5202
N. Berger, C. Borgs, J. T. Chayes, R. M. D'Souza and R. D. Kleinberg, "Competition-Induced Preferential Attachment", cond-mat/0402268
Andrew B. Bernard, and Andreas Moxnes, "Networks and Trade", Annual Review of Economics 10 (2018): 65--85
Carlo Campajola, Raffaele Cristodaro, Francesco Maria De Collibus, Tao Yan, Nicolo' Vallarano, Claudio J. Tessone, "The Evolution Of Centralisation on Cryptocurrency Platforms", arxiv:2206.05081 [Only skimmed, but looks legit]
Vasco M. Carvalho, and Alireza Tahbaz-Salehi, "Production Networks: A Primer", Annual Review of Economics 11 (2019): 635--663
G. F. Davis and H. R. Greve, "Corporate elite networks and governance changes in the 1980s", American Journal of Sociology 103 (1997): 1--37
G. F. Davis, M. Yoo and W. E. Baker, "The small world of the corporate elite"
Matthew Elliott and Benjamin Golub, "Networks and Economic Fragility", Annual Review of Economics 14 (2022): 665--696
Matthew Elliott and Matthew O. Jackson, "Supply Chain Disruptions, the Structure of Production Networks, and the Impact of Globalization", SSRN/4580819 (2023)
Henry Farrell and Abraham Newman, Underground Empire: How America Weaponized the World Economy [I need to finish it...]
Shweta Gaonkar, Angelo Mele, "A model of inter-organizational network formation", arxiv:2105.00458
J.B. Glattfelder, S. Battiston, "Backbone of complex networks of corporations: The flow of control", Physical Review E 80 (2009): 036104, arxiv:0902.0878
Sanjeev Goyal, Connections: An Introduction to the Economics of Networks
Matthew O. Jackson, Social and Economic Networks
Matthew O. Jackson, Tomas Rodriguez-Barraquer and Xu Tan, "Social Capital and Social Quilts: Network Patterns of Favor Exchange", American Economic Review 102 (2012): 1857--1897
Bruce Kogut (ed.), The Small Worlds of Corporate Governance
James R. Lincoln and Michael L. Gerlach, Japan's Network Economy: Structure, Peristence, and Change
Ernest Liu and Aleh Tsyvinski, "A Dynamic Model of Input-Output Networks", NBER working paper (2023) [PDF preprint via Dr. Tsyvinski]
M. S. Mizurchi, The American Corporate Network, 1904--1974
Bruno Pellegrino, "Product Differentiation and Oligopoly: A Network Approach", American Economic Review 115 (2025): 1170--1225 ["firms compete in a network of product market rivalries that emerge endogenously out of the characteristics of the products they supply" --- this sounds like a rather different notion of network than what I mostly have in mind]
Susanne M. Schennach, "Long memory via networking", Econometrica 86 (2018): 2221--2248
John Stachurski and Thomas J. Sargent, Economic Networks: Theory and Computation
Grahame F. Thompson, Between Hierarchies and Markets: The Logic and Limits of Network Forms of Organization
Namatié Traoré, "Networks and Rapid Technological Change: Novel Evidence from the Canadian Biotech Industry", Industry and Innovation 13 (2006): 41--68
Harrison White, Markets from Networks: Socioeconomic Models of Production