Identification of Peer Effects Using Group Size Variation

17 Pages Posted: 1 Dec 2009

See all articles by Laurent Davezies

Laurent Davezies

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Xavier D'Haultfœuille

Center for Research in Economics and Statistics (CREST)

Denis Fougère

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Center for Scientific Research (CNRS); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: 2009-07

Abstract

This paper studies the econometric properties of a linear-in-means model of social interactions. Under a slightly more restrictive framework than Lee (2007), we show that this model is generally identified when at least three different sizes of peer groups are observed in the sample at hand. While unnecessary in general, homoscedasticity may be required in special cases, for instance when endogenous and exogenous peer effects cancel each other. We extend this analysis to the case where only binary outcomes are observed. Once more, most parameters are semiparametrically identified under weak conditions. However, identifying all of them requires more stringent assumptions, including a homoscedasticity condition. We also develop a parametric estimator for the binary case, which relies on the Geweke-Hajivassiliou-Keane (GHK) simulator. Monte Carlo simulations illustrate the influence of group sizes on the accuracy of the estimation, in line with the results obtained by Lee (2007).

Suggested Citation

Davezies, Laurent and d'Haultfoeuille, Xavier and Fougere, Denis, Identification of Peer Effects Using Group Size Variation (2009-07). Econometrics Journal, Vol. 12, Issue 3, pp. 397-413, November 2009, Available at SSRN: https://ssrn.com/abstract=1513595 or http://dx.doi.org/10.1111/j.1368-423X.2009.00296.x

Laurent Davezies (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

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Xavier D'Haultfoeuille

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Denis Fougere

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