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Economic interdependencies have become increasingly present in globalizedproduction, financial and trade systems. While establishing interdependenciesamong economic agents is crucial for the production of complex products, theymay also increase systemic risks due to failure propagation. It is crucial toidentify how network connectivity impacts both the emergent production and riskof collapse of economic systems. In this paper we propose a model to study theeffects of network structure on the behavior of economic systems by varying thedensity and centralization of connections among agents. The complexity ofproduction increases with connectivity given the combinatorial explosion ofparts and products. Emergent systemic risks arise when interconnectionsincrease vulnerabilities. Our results suggest a universal description ofeconomic collapse given in the emergence of tipping points and phasetransitions in the relationship between network structure and risk ofindividual failure. This relationship seems to follow a sigmoidal form in thecase of increasingly denser or centralized networks. The model sheds new lighton the relevance of policies for the growth of economic complexity, andhighlights the trade-off between increasing the potential production of thesystem and its robustness to collapse. We discuss the policy implications ofintervening in the organization of interconnections and system features, andstress how different network structures and node characteristics suggestdifferent directions in order to promote complex and robust economic systems.

How connected is too connected? Impact of network topology on systemic risk and collapse of complex economic systems