Working Papers
A multi-network, or multi-layer network, is a set of nodes that can be connected via multiple types of links. In this paper, I first define a notion of pairwise stability for multi-networks that is analogous to pairwise stability of a single network. When the utility of each agent derived from the multi-layer network is additively separable across networks, then pairwise stability of all individual networks implies pairwise stability of the multi-network. This notion of pairwise stability needs to be refined when different network types are complementary, in other words,when being connected in one way affects the utility derived from other types of connections. The traditional notion of pairwise stability does not allow for the simultaneous addition or removal of multiple link types. As a result, a multi-layer network may be pairwise stable, even if two agents could rearrange the links between them and achieve a Pareto improvement. I define anew notion of network stability, multi-link pairwise stability, which captures this potential for gains between pairs of agents. Finally, I illustrate the implications of link type complementarity for efficiency and stability in a symmetric connections model. The insight arising from this analysis is that link type complementarity generates multi-layer network configurations that are efficient and stable when the same configurations of individual networks are not.
A Quantitative Assessment of Economic Sanctions
Do economic sanctions have bite, and if so, what are the output costs of an embargo? I address these questions through the lens of a three-country dynamic stochastic general equilibrium model. The model can accommodate heterogeneity in country size, with respect to population, output, and trade flows. I model the embargo as a shock to bilateral iceberg trade costs. In this setting, changes in trade costs affect, not only the dynamics of capital formation, but also the steady state level of capital, and hence the long run level of per capita output. In addition, I account for the possibility of sanction evasion via transshipment by embedding a shortest path problem into the model. Goods can take multiple routes from origin to destination and, in equilibrium, flow along the lowest cost path. The model is calibrated to bilateral trade and output data, and used to evaluate the impact of the oil and gas embargo imposed by the E.U. on Iran in 2012. In addition, I use discrepancies in bilateral trade mirror statistics to test for sanction evasion via transshipment. I find that the E.U. oil and gas embargo can account for three fourths of the 6.6 % contraction in output, none of the fall in aggregate consumption expenditures, and one fifth of the 17 % fall in gross capital formation.
Works in Progress
Disentangling the Effect of Trade and Financial Sanctions, with Paul Ko
We study the effect of trade and financial sanctions. Economic sanctions are used to coerce targeted countries into changing policy. Even though sanctions are widely used, little is truly known about their economic impact on the target country. We use the imposition of sanctions by the European Union on Iran as a case study. We first perform a closed economy growth accounting exercise for Iran and find that a decline in productivity was the primary driver of the decline in output Iran experienced in 2012. To further understand the contribution of the sanctions imposed by the EU to the Iranian recession, we perform a business cycle accounting exercise using a small open economy model that embeds both trade and financial shocks.
Who Specializes Where?
I use publicly available census data, the County Business Patterns Database (CBPD), to determine how industrial diversity has been changing across Metropolitan Statistical Areas (MSAs) in the United States. In particular, I am constructing a balanced panel of MSAs, from the CBPD, which contains spatially disaggregated data on employment by industry. Then, I calculate the Ogive index, a measure of distance between a distribution and the uniform distribution, to quantify the degree of industrial diversification for each MSA in the panel. The long term aim of this project is to quantify the trade off between the gains from specialization and those from remaining diversified as insurance against industry specific shocks.