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Transfers and Resilience in Economic Networks

Author

Listed:
  • Montecinos-Pearce Alejandro

    (Universidad Adolfo Ibáñez, School of Business, and Centro de Estudios de Conflicto y Cohesión Social (COES), Santiago, Chile)

  • Parro Francisco

    (Universidad Adolfo Ibáñez, School of Business, Santiago, Chile)

Abstract

We study how decentralized transfers, originated by a selfish motive to preserve direct links, affect the resilience of a network against a shock. Well-off agents transfer resources to other agents in order to prevent the shock from reaching their neighbors. We show that the connectivity of a well-defined portion of the network, specifically, the propagation network, determines the resilience of the entire network. We also show how, although transfers are allocated to a subset of agents, the resilience effect of these transfers is amplified. Lastly, we show that the wealth distribution impacts resilience by determining the incentives of the agents to transfers resources.

Suggested Citation

  • Montecinos-Pearce Alejandro & Parro Francisco, 2024. "Transfers and Resilience in Economic Networks," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 77-126, January.
    • Handle: RePEc:bpj:bejtec:v:24:y:2024:i:1:p:77-126:n:3
    DOI: 10.1515/bejte-2021-0152
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    More about this item

    Keywords

    cascade effects; networks; resilience; transfers;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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