Economic Theory and Computational Economics
Prof. Dr. Herbert Dawid
Network Formation and Location Decisions
Herbert Dawid, Philipp Harting, Anna Zaharieva
The analysis of global effects of local interaction structures has attracted a lot of attention of economists. The term ’local interaction’ might either be interpreted in the sense of spatial proximity (as in the literature on ’New Economic Geography’) or as closeness with respect to some network structure. Whereas in a spatial framework moving to a certain region implies that an economic agent becomes a neighbour of all other agents in that region, in non-spatial networks connections can be established bilaterally. In many relevant economic applications the interaction between economic agents is governed by a combination of different types of neighbourhood structures, where some are of spatial nature and others are due to networks.
Research of members of ETACE focuses on the analysis of the dynamics of network formation and location choices as well as on the implications of different types of ‘proximity’ for individual behaviour and aggregate outcomes. These issues are explored, on the one hand, in an industrial organization context with focus on spillovers that are induced by proximity between firms. For which type of firms is it rational to generate spillover generating links to potential competitors and which firms should stay isolated? Which type of R&D networks and firm clusters emerge under different market conditions? How are prices, profits and welfare affected by such networks? On the other hand, in the context of labour economics, the emergence and implications of worker networks are studied. Empirical research studies show, that between one third and two thirds of the jobs in different countries are found through personal contacts. Do personal contacts increase the probability of finding a job? What is the effect of personal contacts on wages and unemployment? Do personal contacts increase wage inequality if some of the individuals are excluded from networks? And what is the role of socially influenced wage expectations in the emergence and persistence of wage inequality? To tackle the different issues sketched above dynamic equilibrium analysis is used as well as evolutionary game theory and simulation approaches.
Ongoing Work
R&D Network Formation (H. Dawid)
Role of Social Influence and Expectation Formation in the Labor Market (H. Dawid, P. Harting)
Social Capital and Personal Contacts in a Labour Market with Search Frictions (A. Zaharieva)