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Social Interactions - Is There Really an Identification Problem?

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  • Kalckreuth, Ulf von
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    Abstract

    It is an everyday experience that the behavior of individuals belonging to the same social group tends to be correlated. In his seminal work, Manski differentiates two basic types of feedback between group and individual and he maintains that it is not possible to discriminate between the two by mere observation. What is more: Only under very favorable conditions can social effects be distinguished from other reasons for correlations within social groups, such as selectivity. Manski's forceful critique challenges not only the numerous empirical efforts to understand the nature of social interactions. In the light of his arguments many theoretical disputes in the social sciences suddenly appear to be rather futile. Thus, a further analysis of his position seems well justified. The result is quite encouraging. Manski himself renders the solution to his identification problem impossible by imposing a very special assumption. In his econometric model, social effects do not flow from the outcomes realized within the group, but from their respective conditional mathematical expectations. By substituting this critical assumption by a more realistic formulation, a fully identified model is obtained. For this modified model, FIML estimators of all parameters are explicitly derived. The new estimator allows to differentiate clearly between endogenous social effects, exogenous social effects and correlated effects.

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    File URL: https://ub-madoc.bib.uni-mannheim.de/1043/1/567.pdf
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    Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 567.

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    Date of creation: 1999
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    Handle: RePEc:mnh:vpaper:1043

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    1. Steven N. Durlauf, 1992. "A Theory of Persistent Income Inequality," NBER Working Papers 4056, National Bureau of Economic Research, Inc.
    2. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July.
    3. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
    4. repec:att:wimass:9127 is not listed on IDEAS
    5. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
    6. Anne C. Case & Lawrence F. Katz, 1991. "The Company You Keep: The Effects of Family and Neighborhood on Disadvantaged Youths," NBER Working Papers 3705, National Bureau of Economic Research, Inc.
    7. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
    8. Goldberger, Arthur S, 1972. "Structural Equation Methods in the Social Sciences," Econometrica, Econometric Society, vol. 40(6), pages 979-1001, November.
    9. Griliches, Zvi, 1974. "Errors in Variables and Other Unobservables," Econometrica, Econometric Society, vol. 42(6), pages 971-98, November.
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