Growth Models with Externalities on Networks

Giorgio Fabbri, Silvia Faggian and Giuseppe Freni
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Silvia Faggian: Department of Economics, Ca’ Foscari University of Venice, Italy

No 2024011, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This study examines the dynamics of capital stocks distributed among several nodes, representing different sites of production and connected via a weighted, directed network. The network represents the externalities or spillovers that the production in each node generates on the capital stock of other nodes. A regulator decides to designate some of the nodes for the production of a consumption good to maximize a cumulative utility from consumption. It is demonstrated how the optimal strategies and stocks depend on the productivity of the resource sites and the structure of the connections between the sites. The best locations to host production of the consumption good are identified per the model’s parameters and correspond to the least central (in the sense of eigenvector centrality) nodes of a suitably redefined network that combines both flows between nodes and the nodes’ productivity.

Keywords: Capital allocation; Production externalities; Network spillovers; Economic centrality measures (search for similar items in EconPapers)
JEL-codes: C61 D62 O41 R12 (search for similar items in EconPapers)
Date: 2024-11-05
New Economics Papers: this item is included in nep-gro and nep-net
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Related works:
Working Paper: Growth models with externalities on networks (2024)
Working Paper: Growth Models with Externalities on Networks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2024011

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