Resolving the Identification Problem in Linear Social Interactions Models: Modeling with Between-Group Spillovers

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Resolving the Identification Problem in Linear Social Interactions Models: Modeling with Between-Group Spillovers

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Ethan Cohen-Cole (University of Wisconsin - Madison)

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Ethan Cohen-Cole

Abstract

The linear-in-means model has been a theoretical and empirical workhorse of the social interactions field. As was noted by Manski (1993), the collinearity between group-level 'contextual' and 'endogenous' effects leads to an inability to identify the structural parameters of this model. Manski called this the 'reflection' problem. This paper suggests that Manksi’s reflection problem is unique to a special case of a more general context in which agents care about multiple reference groups. Specifically, the identification problem is resolved through a model generalization to include between-group and within-group effects.

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Paper provided by EconWPA in its series Others with number 0501001.

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Length: 23 pages
Date of creation: 03 Jan 2005
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Handle: RePEc:wpa:wuwpot:0501001

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Find related papers by JEL classification:
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
D10 - Microeconomics - - Household Behavior - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-01-09 (All new papers)
NEP-ECM-2005-01-09 (Econometrics)
NEP-NET-2005-01-09 (Network Economics)
NEP-URE-2005-01-09 (Urban & Real Estate Economics)

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