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The Network of Inter-Regional Direct Investment Stocks across Europe

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  • Stefano Battiston

    (Chair for Systems Design, ETH Z\"urich, Switzerland;)

  • Jo\~ao F. Rodrigues

    (Chair for Systems Design, ETH Z\"urich, Switzerland;)

  • Hamza Zeytinoglu

    (Clarifix Ltd., London, UK)

Abstract

We propose a methodological framework to study the dynamics of inter-regional investment flow in Europe from a Complex Networks perspective, an approach with recent proven success in many fields including economics. In this work we study the network of investment stocks in Europe at two different levels: first, we compute the inward-outward investment stocks at the level of firms, based on ownership shares and number of employees; then we estimate the inward-outward investment stock at the level of regions in Europe, by aggregating the ownership network of firms, based on their headquarter location. Despite the intuitive value of this approach for EU policy making in economic development, to our knowledge there are no similar works in the literature yet. In this paper we focus on statistical distributions and scaling laws of activity, investment stock and connectivity degree both at the level of firms and at the level of regions. In particular we find that investment stock of firms is power law distributed with an exponent very close to the one found for firm activity. On the other hand investment stock and activity of regions turn out to be log-normal distributed. At both levels we find scaling laws relating investment to activity and connectivity. In particular, we find that investment stock scales with connectivity in a similar way as has been previously found for stock market data, calling for further investigations on a possible general scaling law holding true in economical networks.

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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number physics/0508206.

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Date of creation: Aug 2005
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Publication status: Published in Advances in Complex Systems, vol. 10, no. 1 (2007), pp. 29-51
Handle: RePEc:arx:papers:physics/0508206

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  1. Garlaschelli, Diego & Battiston, Stefano & Castri, Maurizio & Servedio, Vito D.P. & Caldarelli, Guido, 2005. "The scale-free topology of market investments," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(2), pages 491-499.
  2. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
  3. Fujiwara, Yoshi & Di Guilmi, Corrado & Aoyama, Hideaki & Gallegati, Mauro & Souma, Wataru, 2004. "Do Pareto–Zipf and Gibrat laws hold true? An analysis with European firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 335(1), pages 197-216.
  4. D. Garlaschelli & M. I. Loffredo, 2004. "Fitness-dependent topological properties of the World Trade Web," Papers cond-mat/0403051, arXiv.org, revised Oct 2004.
  5. Battiston, Stefano, 2004. "Inner structure of capital control networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 338(1), pages 107-112.
  6. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
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Citations

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Cited by:
  1. Jiang, Zhi-Qiang & Zhou, Wei-Xing, 2010. "Complex stock trading network among investors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4929-4941.
  2. Song, Dong-Ming & Jiang, Zhi-Qiang & Zhou, Wei-Xing, 2009. "Statistical properties of world investment networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(12), pages 2450-2460.
  3. Junjie Wang & Shuigeng Zhou & Jihong Guan, 2010. "Characteristics of Real Futures Trading Networks," Papers 1004.4402, arXiv.org, revised Feb 2011.
  4. Piccardi, Carlo & Calatroni, Lisa & Bertoni, Fabio, 2010. "Communities in Italian corporate networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5247-5258.
  5. Ma, Yuan-yuan & Zhuang, Xin-tian & Li, Ling-xuan, 2011. "Research on the relationships of the domestic mutual investment of China based on the cross-shareholding networks of the listed companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(4), pages 749-759.
  6. Shu-Heng Chen & Sai-Ping Li, 2011. "Econophysics: Bridges over a Turbulent Current," Papers 1107.5373, arXiv.org.
  7. Wang, Junjie & Zhou, Shuigeng & Guan, Jihong, 2011. "Characteristics of real futures trading networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(2), pages 398-409.
  8. Weisbuch, Gérard & Battiston, Stefano, 2007. "From production networks to geographical economics," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 448-469.

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