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Dealing with Endogenous Shocks in Dynamic Friendship Network

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  • Marchenko, Maria

Abstract

Different types of shocks, or the treatment of one of the players in a specific network, may influence not only the future performance of themselves but also affect their network connections. It is crucial to explore the behaviour of the whole network in response to such an event. This paper focuses on the cases of endogenously formed shock. The logic used in the peer effect literature is adopted to develop the dynamic model and accounts for the endogeneity of the shock. The model allows us to predict the endogenous part of the shock and use the remaining unexpected component to estimate the effect of the shock on the changes in the performance of network connections. The identification conditions for effect are derived, and the consistent estimation procedure is proposed.

Suggested Citation

  • Marchenko, Maria, 2019. "Dealing with Endogenous Shocks in Dynamic Friendship Network," Department of Economics Working Paper Series 291, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:7099
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    File URL: https://epub.wu.ac.at/7099/
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    1. Rokhaya Dieye & Habiba Djebbari & Felipe Barrera-Osorio, 2014. "Accounting for Peer Effects in Treatment Response," AMSE Working Papers 1435, Aix-Marseille School of Economics, France, revised Jul 2014.
    2. Maria Marchenko, 2019. "Endogenous Shocks in Social Networks: Exam Failures and Friends' Future Performance," Department of Economics Working Papers wuwp292, Vienna University of Economics and Business, Department of Economics.
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    6. 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.
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    1. Marchenko, Maria, 2019. "Endogenous Shocks in Social Networks: Exam Failures and Friends' Future Performance," Department of Economics Working Paper Series 292, WU Vienna University of Economics and Business.

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    More about this item

    Keywords

    social networks; dynamic networks; peer effects; endogenous shock;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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