Alexander Teytelboym

Homophily in online social networks

We develop a parsimonious and tractable dynamic social network formation model in which agents interact in overlapping social groups. The model allows us to analyse network properties and homophily patterns simultaneously. We derive analytical expressions for the distributions of degree and, importantly, of homophily indices, using mean-field approximations. We test our model using a large dataset from Facebook covering student friendship networks in 10 American colleges in 2005. We find that our analytical expressions and simulations fit the homophily patterns, degree distribution, and individual clustering coefficients well with the data.

Political Economy of Climate Change Policy

Anthropogenic climate change poses a threat to all people and governments, but the response to that threat varies enormously across countries. Some adopt politically costly and economically challenging climate change mitigation policies, while others deny that climate change is occurring. Why do some countries adopt effective climate change policies while others do not? To answer this fundamental question, this paper analyses the political economy determinants of climate change policy around the world. In order to measure climate change policy, we introduce a new index, the ‘Climate Laws, Institutions and Measures Index’ (CLIMI), the first systematic attempt to measure countries’ policy responses to the risk of climate change. CLIMI covers all the relevant institutions and sector-specific policies in 95 countries, representing 90% of the world’s GHG emissions. We then use CLIMI to examine the political and economic factors that determine countries’ choices to implement policies to tackle climate change. We find that the level of democracy alone is not a major driver of climate change policy adoption, but that public knowledge of climate change is. Not surprisingly, a high concentration of carbon-intensive industry in the economy hinders the adoption of climate change policy. Countries in which the citizenry has a better public awareness of climate change have more effective climate policies regardless of the presence of democratic institutions.

Resilient and inclusive prosperity within planetary boundaries

The current model of economic growth generated unprecedented increases in human wealth and prosperity during the 19th and 20th centuries. The main mechanisms have been the rapid pace of technological and social innovation, human capital accumulation, and the conversion of resources and natural capital into more valuable forms of produced capital. However, there is evidence emerging that this model may be approaching environmental limits and planetary boundaries, and that the conversion of natural capital needs to slow down rapidly and then be reversed. Some commentators have asserted that in order for this to occur, we will need to stop growing altogether and, instead, seek prosperity without growth. Others argue that environmental concerns are low-priority luxuries to be contemplated once global growth has properly returned to levels observed prior to the 2008 financial crisis. A third group argues that there is no trade-off, and, instead, promotes green growth: the (politically appealing) idea is that we can simultaneously grow and address our environmental problems. This paper provides a critical perspective on this debate and suggests that a substantial research agenda is required to come to grips with these challenges. One place to start is with the relevant metrics: measures of per-capita wealth, and, eventually, quantitative measures of prosperity, alongside a dashboard of other sustainability indicators. A public and political focus on wealth (a stock), and its annual changes, could realistically complement the current focus on market-based gross output as measured by GDP (a flow). This could have important policy implications, but deeper changes to governance and business models will be required.

Bilateral Contract Networks for Peer-to-Peer Energy Trading

This paper proposes bilateral contract networks as a new scalable market design for peer-to-peer energy trading. Coordinating small-scale distributed energy resources to shape overall demand could offer significant value to power systems, by alleviating the need for investments in upstream generation and transmission infrastructure, increasing network efficiency and increasing energy security. However, incentivising coordination between the owners of large-scale and small-scale energy resources at different levels of the power system remains an unsolved challenge. This paper introduces real-time and forward markets, consisting of energy contracts offered between generators with fuel-based sources, suppliers acting as intermediaries and consumers with inflexible loads, time-coupled flexible loads and/or renewable sources. For each type of agent, utility-maximising preferences for real-time contracts and forward contracts are derived. It is shown that these preferences satisfy full substitutability conditions essential for establishing the existence of a stable outcome—an agreed network of contracts specifying energy trades and prices, which agents do not wish to mutually deviate from. Important characteristics of energy trading are incorporated, including upstream–downstream energy balance and forward market uncertainty. Full substitutability ensures a distributed price-adjustment process can be used, which only requires local agent decisions and agent-to-agent communication between trading partners.

Matching Systems for Refugees

Executive Summary1 Design of matching systems between refugees and states or local areas is emerging as one of the most promising solutions to problems in refugee resettlement. We describe the basics of two-sided matching theory used in a number of allocation problems, such as school choice, where both sides need to agree to the match. We then explain how these insights can be applied to international refugee matching in the context of the European Union and examine how refugee matching might work within the United Kingdom, Canada, and the United States.

Trading Networks with Frictions

We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes, bargaining costs, and incomplete markets. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative stability property called trail stability. In the presence of frictions, competitive equilibria might be neither stable nor (constrained) Pareto-efficient. In the absence of frictions, on the other hand, competitive equilibria are stable and in the core, even if utility is imperfectly transferable.

Targeted Carbon Tax Reforms

We show that in the presence of intersectoral linkages targeted sectoral carbon taxes might be a more effective way of reducing emissions than economy-wide carbon pricing. A carbon tax imposed on all sectors unambiguously reduces aggregate emissions, but taxes targeted at the set of key sectors can lead to the greatest emissions reduction. Due to intersectoral linkages and a tax rebate effect, taxing non-key sectors dampens the reduction in aggregate emissions. A key sector typically not only produces a lot of emissions, but also has a large influence on emissions in the rest of the economy. We focus on incremental changes in carbon taxes—carbon tax reforms—to characterise the set of key sectors analytically.

Economic Complexity and the Green Economy

Which countries currently have the productive capabilities to thrive in the green economy? How might countries reorient their existing industrial structures to be more competitive in an environmentally friendly world? To investigate these questions, this paper develops a novel methodology for measuring productive capabilities to the green economy. By constructing a new and comprehensive dataset of traded green products and drawing on economic complexity methods, we rank countries in terms of their ability to export complex green products competitively. We show that higher ranked countries are more likely to have higher environmental patenting rates, lower CO2 emissions, and more stringent environmental policies even after controlling for per capita GDP. We then examine countries’ potential to transition into green products in the future and find strong path dependence in the accumulation of green capabilities. Our results shed new light on green industrialisation and have a number of implications for green industrial policy.

Social Groups and Social Network Formation

We present a dynamic model of social network formation in which a fixed number of agents interact in overlapping social groups. We derive several results on the formation of links in such networks, including results on the degree distribution, on comparative statics relating degree and group size, and on the dynamics of homophily. In particular, we derive comparative statics showing that degree is typically positively related to social group size but negatively related to the size of the overlap across multiple social groups. This is supported by evidence from a Facebook dataset. We also show that homophily over an agents lifespan in the network can be non-monotonic, reaching a global maximum in some period before eventually decreasing.