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Peer Effects and Endogenous Social Interactions

Koen Jochmans

No 22-1348, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper proposes a solution to the problem of the self-selection of peers in the linear-in-means model. We do not require to specify a model for how the selection of peers comes about. Rather, we exploit two restrictions that are inherent in many such specifications to construct conditional moment conditions. The restrictions in question are that link decisions that involve a given individual are not all independent of one another, but that they are independent of the link decisions made between other pairs of individuals that are located sufficiently far away in the network. These conditions imply that instrumental variables can be constructed from leave-own-out networks.

Keywords: instrumental variable; linear-in-means model; network; self-selection (search for similar items in EconPapers)
JEL-codes: C31 C36 (search for similar items in EconPapers)
Date: 2022-07-25
New Economics Papers: this item is included in nep-net and nep-ure
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Working Paper: Peer effects and endogenous social interactions (2020) Downloads
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