Household consumption can be influenced by the consumption behaviour of peers. This column examines why this is the case, and considers some policy implications. The tendency for individuals to under-save (or over-borrow) in an attempt to ‘keep up with the Joneses’ appears to be driven by the average consumption of their peers, rather than by the consumption of conspicuous items. If tax policy fails to consider these peer effects, it risks wrongly estimating the effects of tax reforms that target certain groups.
Giacomo De Giorgi, Anders Frederiksen, Luigi Pistaferri, 17 September 2016
Matthew Lindquist, Jan Sauermann, Yves Zenou, 10 December 2015
There is growing evidence that worker productivity is contagious. This column examines the impact of co-worker networks on productivity using tools from network economics. There are indeed strong network effects in worker productivity, with increases in the productivity of an individual’s co-worker network leading to an increase in the individual’s productivity. Also, exposure to trained workers increases the productivity of non-trained workers. The findings have implications for the optimal structure of co-worker networks within firms.
Xiaodong Liu, Eleonora Patacchini , Edoardo Rainone, 28 January 2014
Sleep is a key determinant of educational attainment among young adults, and carries with it longstanding health implications. This column provides evidence of network effects in adolescent sleeping decisions using a novel econometric approach. Young adults respond to the sleeping behaviour of their peer group, holding constant other observables. This compounding effect suggests a group approach to solving behavioural problems associated with sleep deprivation.
Richard Baldwin, 20 January 2014
The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought of as network externalities and harmonisation costs respectively. More research is needed to determine how the megaregional trade agreements across the Pacific and Atlantic will fit with the WTO.