Reconstructing Nonparametric Productivity Networks

Abstract

Network models provide a general representation of inter-connected system dynamics. This ability to connect systems has led to a proliferation of network models for economic productivity analysis, primarily estimated non-parametrically using Data Envelopment Analysis (DEA). While network DEA models can be used to measure system performance, they lack a statistical framework for inference, due in part to the complex structure of network processes. We fill this gap by developing a general framework to infer the network structure in a Bayesian sense, in order to better understand the underlying relationships driving system performance. Our approach draws on recent advances in information science, machine learning and statistical inference from the physics of complex systems to estimate unobserved network linkages. To illustrate, we apply our framework to analyze the production of knowledge, via own and cross-disciplinary research, for a world-country panel of bibliometric data. We find significant interactions between related disciplinary research output, both in terms of quantity and quality. In the context of research productivity, our results on cross-disciplinary linkages could be used to better target research funding across disciplines and institutions. More generally, our framework for inferring the underlying network production technology could be applied to both public and private settings which entail spillovers, including intra- and inter-firm managerial decisions and public agency coordination. This framework also provides a systematic approach to model selection when the underlying network structure is unknown.