Traditionally, econometric research on social interaction effects has used fairly large social groups (schools, Census tracts, etc.). However, new data which describes the behavior of much smaller peer groups is becoming available. This paper analyzes the behavior of "small neighborhoods" in the presence of social interaction effects, and finds results which are very different from the existing "large neighborhood" literature (see Brock and Durlauf 2000). First, small neighborhoods will have multiple equilibria for a much larger range of parameter values. Second, the standard estimation procedure, while consistent for large neighborhoods, is inconsistent for small neighborhoods. A consistent indirect inference procedure is developed and applied to data on youth smoking. The results indicate the standard method produces a substantial overstatement in the strength of peer influence.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Find related papers by JEL classification: C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models I10 - Health, Education, and Welfare - - Health - - - General