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Structural Homophily

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  • Vincent Boucher

    () (CIREQ - Centre interuniversitaire de recherche en économie quantitative - Université de Montréal)

Abstract

Homophily, or the fact that similar individuals tend to interact with each other, is a prominent feature of economic and social networks. Most existing theories of homophily are based on a descriptive approach and abstract away from equilibrium considerations. I show that the equilibrium structure of homophily has empirical power, as it can be used to recover underlying preference parameters. I build a non-cooperative model of network formation, which produces a unique, empirically realistic equilibrium network. Individuals have homophilic preferences and face capacity constraints on the number of links. I develop a novel empirical method, based on the shape of the equilibrium network, which allows for the identification and estimation of the underlying homophilic preferences. I apply this new methodology to race-based choices regarding friendship decisions among American teenagers.

Suggested Citation

  • Vincent Boucher, 2012. "Structural Homophily," Working Papers hal-00720825, HAL.
  • Handle: RePEc:hal:wpaper:hal-00720825
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00720825
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    Cited by:

    1. Vincent Boucher, 2017. "The Estimation of Network Formation Games with Positive Spillovers," Cahiers de recherche 1710, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    2. Boucher, Vincent & Fortin, Bernard, 2015. "Some Challenges in the Empirics of the Effects of Networks," IZA Discussion Papers 8896, Institute for the Study of Labor (IZA).

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