Transfers and Resilience in Economic Networks

Alejandro Montecinos-Pearce and Francisco Parro

The B.E. Journal of Theoretical Economics, 2024, vol. 24, issue 1, 77-126

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.

Keywords: cascade effects; networks; resilience; transfers (search for similar items in EconPapers)
JEL-codes: D20 D85 E32 Z13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/bejte-2021-0152

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