STRUCTURAL HOMOPHILY

Vincent Boucher

International Economic Review, 2015, vol. 56, issue 1, 235-264

Abstract: Homophily, or the fact that similar individuals tend to interact with each other, is a prominent feature of economic and social networks. I show that the equilibrium structure of homophily has empirical power. I build a strategic model of network formation, which produces a unique equilibrium network. Individuals have homophilic preferences and face capacity constraints on the number of links. I develop a novel empirical method, based on the shape of the equilibrium network, which allows for the identification and estimation of the underlying homophilic preferences. I apply this new methodology to the formation of friendship networks.

Date: 2015
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https://doi.org/10.1111/iere.12101

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Working Paper: Structural Homophily (2012)
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