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Sieve IV estimation of cross-sectional interaction models with nonparametric endogenous effect

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  • Hoshino, Tadao

Abstract

In this study, we consider cross-sectional interaction models including spatial autoregressive models and peer effects models as special cases. Our model allows the endogenous effect – the effect of others’ outcomes on one’s own outcome – to be nonlinear and nonparametric. For the model estimation, we propose a sieve instrumental variable estimator and establish both its consistency and asymptotic normality. Furthermore, we propose a nonparametric specification test for the linearity of the endogenous effect. Under the null hypothesis of linearity, we show that the test statistic is asymptotically distributed as normal. As an empirical illustration, we focus on the data on regional economic performance investigated by Gennaioli et al. (2013). This empirical analysis highlights the usefulness of the proposed model and method.

Suggested Citation

  • Hoshino, Tadao, 2022. "Sieve IV estimation of cross-sectional interaction models with nonparametric endogenous effect," Journal of Econometrics, Elsevier, vol. 229(2), pages 263-275.
    • Handle: RePEc:eee:econom:v:229:y:2022:i:2:p:263-275
    DOI: 10.1016/j.jeconom.2020.11.008
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    Cited by:

    1. Tadao Hoshino, 2024. "Functional Spatial Autoregressive Models," Papers 2402.14763, arXiv.org, revised Oct 2024.

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    More about this item

    Keywords

    Instrumental variable estimation; Peer effects; Sieve estimation; Social interactions; Spatial autoregressive models;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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