Financial Contagion in Industrial Clusters: A Dynamical Analysis and Network Simulation
AbstractIn this work we analyse the resilience of industrial districts to exogenous economic shocks. Firstly, we define a basic industrial district through a set of assumptions which prove to be critical for systemic risk in the event of a financial shock. In the course of the work we progressively relax the assumptions to make room for more complex representations. Consequently, depending on two dimensions of complexity (structure of economic interactions and the degree of heterogeneity of the industrial population), we develop three different models of industrial clusters, employing non-linear ordinary differential equations and percolation dynamics in graph theory. A mechanism of financial contagion is introduced and a threshold condition is derived in order to study each model’s resilience. Eventually, we prove that it is the structure of economic interactions which produces a structural change in the threshold characterization.
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Bibliographic InfoPaper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 654.
Date of creation: Oct 2012
Date of revision:
diffusion; networks; industrial clusters; crisis;
Find related papers by JEL classification:
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- G01 - Financial Economics - - General - - - Financial Crises
- H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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- Timothy Besley, 1995. "Nonmarket Institutions for Credit and Risk Sharing in Low-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 115-127, Summer.
- Cristopher Moore & M. E. J. Newman, 2000. "Epidemics and Percolation in Small-World Networks," Working Papers 00-01-002, Santa Fe Institute.
- Russo, Margherita, 1985. "Technical change and the industrial district: The role of interfirm relations in the growth and transformation of ceramic tile production in Italy," Research Policy, Elsevier, vol. 14(6), pages 329-343, December.
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