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Essays on macroeconomic networks, volatility and labor allocation

Thesis (Ph.D.)--Boston University / This dissertation comprises three chapters on the network structure of the economy
and its macroeconomic consequences. In the first two chapters, I analyze the relationship
between macroeconomic volatility of individual countries and the international trade network
the countries are embedded in. In the third chapter, I study the international migration
network. In the first chapter, I show a regularity that European countries occupying more
central positions in the intra-Europe trade network exhibit lower macroeconomic volatility.
Intuitively the trade network has a core-periphery structure and the core is more stable
than the periphery. This is puzzling because the core country is also more open to shocks
coming from all other countries, which increases volatility. This relationship is informative
in the context of the unsettled, classic debate on whether trade openness increases or
decreases country-level volatility. Rather than considering an aggregate measure like trade
openness, the idea of centrality provides a more comprehensive measure of the nature and
strength of trade linkages as well as the identity of the trade partners, all of which have
important effects on volatility. I construct a multi-country, multi-sector model subject to
idiosyncratic productivity and liquidity shocks, and fully characterize the trade network
generated in equilibrium. I calibrate the model to the European Union and I show that it
closely replicates the observed negative relationship.

Next, I extend the theory presented to incorporate a general network structure and its
effects on volatility. From an empirical perspective, I construct an instrument based on
geographic distance to establish the finding. From a theoretical perspective, I consider the
possibilities of missing linkages and stochastic weights in the trade networks.

The third chapter studies the European immobility puzzle. A theory of cross-country
migration is devised in the form of labor mobility based on regional and sectoral productivity
shocks in a multi-country, multi-sector setting. Differences across countries in
socio-cultural and institutional factors induce a friction on such labor reallocation process.
The model explains interstate migration network within the U. S. (frictionless benchmark)
well. When applied to Europe, the model predicts a sizeable missing mass of migrants.
Our estimates show this to be due to socio-cultural barriers.

Identiferoai:union.ndltd.org:bu.edu/oai:open.bu.edu:2144/34329
Date January 2015
CreatorsChakrabarti, Anindya S.
PublisherBoston University
Source SetsBoston University
Languageen_US
Detected LanguageEnglish
TypeThesis/Dissertation

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