Estimating Social Network Models with Missing Links

Arthur Lewbel, Xi Qu and Xun Tang
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Xi Qu: Shanghai Jiao Tong University

No 1056, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We propose an adjusted 2SLS estimator for social network models when some existing network links are missing from the sample (due, e.g., to recall errors by survey respondents, or lapses in data input). In the feasible structural form, missing links make all covariates endogenous and add a new source of correlation between the structural errors and endogenous peer outcomes (in addition to simultaneity), thus invalidating conventional estimators used in the literature. We resolve these issues by rescaling peer outcomes with estimates of missing rates and constructing instruments that exploit properties of the noisy network measures. We apply our method to study peer effects in household decisions to participate in a microfinance program in Indian villages. We find that ignoring missing links and applying conventional instruments would result in a sizeable upward bias in peer effect estimates.

Keywords: social networks; 2SLS; missing links (search for similar items in EconPapers)
JEL-codes: C31 C51 G21 L14 (search for similar items in EconPapers)
Date: 2022-12-20
New Economics Papers: this item is included in nep-ecm, nep-mfd, nep-net, nep-pay and nep-ure
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Citations: View citations in EconPapers (1)

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