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Latent Position-Based Modeling of Parameter Heterogeneity

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  • Vainora, J.

Abstract

This paper proposes to use the Generalized Random Dot Product Graph model and the underlying latent positions to model parameter heterogeneity. We discuss how the Stochastic Block Model can be directly applied to model individual parameter heterogeneity. We also develop a new procedure to model pairwise parameter heterogeneity requiring the number of distinct latent distances between unobserved communities to be low. It is proven that, asymptotically, the heterogeneity pattern can be completely recovered. Additionally, we provide three test statistics for the assumption on the number of distinct latent distances. The proposed methods are illustrated using data on a household microfinance program and the S&P 500 component stocks.

Suggested Citation

  • Vainora, J., 2024. "Latent Position-Based Modeling of Parameter Heterogeneity," Cambridge Working Papers in Economics 2455, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2455
    Note: jv429
    as

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    File URL: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2455.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Networks; Spectral Embedding; Clustering; Generalized Random Dot Product Graph; Stochastic Block Model;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

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