Econometric analysis of production networks with dominant units

This paper introduces the notions of strongly and weakly dominant units for networks, and shows that pervasiveness of shocks to a network is measured by the degree of dominance of its most pervasive unit; shown to be equivalent to the inverse of the shape parameter of the power law fitted to the net...

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Bibliographic Details
Published in:Journal of econometrics 2020-12, Vol.219 (2), p.507-541
Main Authors: Pesaran, M. Hashem, Yang, Cynthia Fan
Format: Article
Language:English
Subjects:
Aggregate fluctuations
Analysis
Asymptotic methods
Degree of pervasiveness
Dominance
Extremum estimator
Input–output tables
Mathematical models
Mechanical properties
Monte Carlo simulation
Neural networks
Outdegrees
Power law
Seminars
Spatial models
Strongly and weakly dominant units
United States economic conditions
US economy
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Summary:This paper introduces the notions of strongly and weakly dominant units for networks, and shows that pervasiveness of shocks to a network is measured by the degree of dominance of its most pervasive unit; shown to be equivalent to the inverse of the shape parameter of the power law fitted to the network outdegrees. New cross-section and panel extremum estimators of the degree of dominance in networks are proposed, and their asymptotic properties investigated. The small sample properties of the proposed estimators are examined by Monte Carlo experiments, and their use is illustrated by an empirical application to US input–output tables.
ISSN:0304-4076
1872-6895
DOI:10.1016/j.jeconom.2020.03.014