Spatial Diffusion of Economic Shocks in Networks
Ashani Amarasinghe (),
Paul Raschky () and
Yves Zenou ()
No 12854, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The aggregate economic impact of any developmental project depends on its effects within the chosen administrative region as well as its economic spillovers into other regions. However, little is known about how these spillovers propagate through geographic, ethnic and road networks. In this paper, we analyze both theoretically and empirically the role of these networks in the spatial diffusion of local economic shocks. We develop a network model that shows how a district's level of prosperity is related to its position in the network. The network model's first-order conditions are used to derive an econometric model of spatial spillovers that we estimate using a panel of 5,944 districts from 53 African countries over the period 1997-2013. To identify the causal effect of spatial diffusion, we exploit cross sectional variation in the location of mineral mines and exogenous time variation in world mineral prices. Our results show that road and ethnic connectivity are particularly important factors for diffusing economic spillovers over longer distances. We then use the estimated parameters from the econometric model to calculate the key player centralities, which determine which districts are key in propagating local economic shocks across Africa. We further show how counterfactual exercises based on these estimates and the underlying network structure can inform us about the potential gains from policies that increase economic activity in specific districts or improve road connectivity between districts.
Keywords: economic development; key player centrality; Natural resources; networks; spatial spillovers; Sub-Saharan Africa; Transportation (search for similar items in EconPapers)
JEL-codes: O13 O55 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-net and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
Working Paper: Spatial Diffusion of Economic Shocks in Networks (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12854
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12854
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().