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Identification of Peer Effects through Social Networks

  • Yann Bramoullé
  • Habiba Djebbari
  • Bernard Fortin

We provide new results regarding the identification of peer effects. We consider an extended version of the linear-in-means model where each individual has his own specific reference group. Interactions are thus structured through a social network. We assume that correlated unobservables are either absent, or treated as fixed effects at the component level. In both cases, we provide easy-to-check necessary and sufficient conditions for identification. We show that endogenous and exogenous effects are generally identified under network interaction, although identification may fail for some particular structures. Monte Carlo simulations provide an analysis of the effects of some crucial characteristics of a network (i.e., density, intransitivity) on the estimates of social effects. Our approach generalizes a number of previous results due to Manski (1993), Moffitt (2001), and Lee (2006).

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Paper provided by CIRPEE in its series Cahiers de recherche with number 0705.

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Date of creation: 2007
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Handle: RePEc:lvl:lacicr:0705
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  1. Graham, Bryan S. & Hahn, Jinyong, 2005. "Identification and estimation of the linear-in-means model of social interactions," Economics Letters, Elsevier, vol. 88(1), pages 1-6, July.
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  3. Jacob M. Markman & Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2003. "Does peer ability affect student achievement?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 527-544.
  4. Bruce A. Weinberg, 2007. "Social Interactions with Endogenous Associations," NBER Working Papers 13038, National Bureau of Economic Research, Inc.
  5. Brock,W.A. & Durlauf,S.N., 2004. "Identification of binary choice models with social interactions," Working papers 2, Wisconsin Madison - Social Systems.
  6. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, vol. 81(2), pages 337-356, December.
  7. Marie-Claire Villeval & Bernard Fortin & Guy Lacroix, 2005. "Tax Evasion and Social Interactions," Working Papers 0410, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  8. David J. Zimmerman, 2003. "Peer Effects in Academic Outcomes: Evidence from a Natural Experiment," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 9-23, February.
  9. Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2004. "Tax Evasion and Social Interactions," Post-Print halshs-00175016, HAL.
  10. Yannis M. Ioannides & Jeffrey E. Zabel, 2000. "Neighborhood Effects and Housing Demand," Discussion Papers Series, Department of Economics, Tufts University 0012, Department of Economics, Tufts University.
  11. Brian Krauth, 2004. "Simulation-based estimation of peer effects," Econometrics 0408002, EconWPA.
  12. Manski, C.F., 1992. "Identification Problems in the Social Sciences," Working papers 9217, Wisconsin Madison - Social Systems.
  13. Sanjeev Goyal & Marco van der Leij & José Luis Moraga-Gonzàlez, 2004. "Economics: An Emerging Small World?," Working Papers 2004.84, Fondazione Eni Enrico Mattei.
  14. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October.
  15. Lee, Lung-fei, 2007. "Identification and estimation of econometric models with group interactions, contextual factors and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 333-374, October.
  16. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
  17. Brock,W.A. & Durlauf,S.N., 2003. "Multinomial choice with social interactions," Working papers 1, Wisconsin Madison - Social Systems.
  18. De Giorgi, Giacomo & Pellizzari, Michele & Redaelli, Silvia, 2007. "Be as Careful of the Books You Read as of the Company You Keep: Evidence on Peer Effects in Educational Choices," IZA Discussion Papers 2833, Institute for the Study of Labor (IZA).
  19. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
  20. Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2005. "Peer Effects and Social Networks in Education and Crime," Working Paper Series 645, Research Institute of Industrial Economics.
  21. Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2004. "Tax Evasion and Social Interactions," Post-Print halshs-00180104, HAL.
  22. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May.
  23. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
  24. Alejandro Gaviria & Steven Raphael, 2001. "School-Based Peer Effects And Juvenile Behavior," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 257-268, May.
  25. Blume,L.E. & Durlauf,S.N., 2005. "Identifying social interactions : a review," Working papers 12, Wisconsin Madison - Social Systems.
  26. Cohen-Cole, Ethan, 2006. "Multiple groups identification in the linear-in-means model," Economics Letters, Elsevier, vol. 92(2), pages 157-162, August.
  27. Bryan S. Graham, 2008. "Identifying Social Interactions Through Conditional Variance Restrictions," Econometrica, Econometric Society, vol. 76(3), pages 643-660, 05.
  28. Soetevent, Adriaan R. & Kooreman, Peter, 2004. "A discrete choice model with social interactions; with an application to high school teen behavior," CCSO Working Papers 200401, University of Groningen, CCSO Centre for Economic Research.
  29. Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2007. "Tax Evasion and Social Interactions," Post-Print halshs-00238448, HAL.
  30. Laurent Davezies & Xavier d'Haultfoeuille & Denis Fougère, 2007. "Identification of Peer Using Group Size Variation," Working Papers 2007-34, Centre de Recherche en Economie et Statistique.
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  34. Lung-fei Lee, 2003. "Best Spatial Two-Stage Least Squares Estimators for a Spatial Autoregressive Model with Autoregressive Disturbances," Econometric Reviews, Taylor & Francis Journals, vol. 22(4), pages 307-335.
  35. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July.
  36. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
  37. Trogdon, Justin G. & Nonnemaker, James & Pais, Joanne, 2008. "Peer effects in adolescent overweight," Journal of Health Economics, Elsevier, vol. 27(5), pages 1388-1399, September.
  38. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  39. Esther Duflo & Emmanuel Saez, 2003. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 815-842, August.
  40. Adriaan R. Soetevent, 2006. "Empirics of the Identification of Social Interactions; An Evaluation of the Approaches and Their Results ," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 193-228, 04.
  41. Kooreman, P. & Soetevent, A., 2007. "A discrete choice model with social interactions; with an application to high school teen behavior," Other publications TiSEM 39fff234-271a-4058-9912-7, Tilburg University, School of Economics and Management.
  42. Bruce Sacerdote, 2000. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," NBER Working Papers 7469, National Bureau of Economic Research, Inc.
  43. Laurent Davezies & Xavier D'Haultfoeuille & Denis Fougère, 2009. "Identification of peer effects using group size variation," Econometrics Journal, Royal Economic Society, vol. 12(3), pages 397-413, November.
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