Multivariate Choice and Identification of Social Interactions

58 Pages Posted: 2 Oct 2012

See all articles by Ethan Cohen-Cole

Ethan Cohen-Cole

Econ One Research

Xiaodong Liu

University of Colorado at Boulder - Department of Economics

Yves Zenou

Monash University - Department of Economics; Stockholm University; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2012

Abstract

In this paper, we investigate the impact of peers on own outcomes where all agents embedded in a network choose more than one activity. We develop a simple network model that illustrates these issues. We differentiate between the ‘seemingly unrelated’ simultaneous equations model where people are influenced only by others within the same activity, the ‘triangular’ simultaneous equations model, where there is some asymmetry in the peers’ cross effects, and the ‘square’ simultaneous equations model, where all possible cross-choice effects are taken into account. We develop the conditions under which each model is identified, showing that the general ‘square’ simultaneous equations model with both simultaneity effect and cross-choice peer effect cannot be identified without any exclusion restrictions. We then study the impact of peer effects on education and screen activities and show that the estimated within- and cross-choice peer effects both have non-trivial impacts on adolescent behavior. We find, in particular, that, keeping peers’ grades and screen activities fixed, watching more TV could be beneficial to a student’s grade.

Keywords: identification, peer effects, Social networks

JEL Classification: C21, C3, I21, Z13

Suggested Citation

Cohen-Cole, Ethan and Liu, Xiaodong and Zenou, Yves, Multivariate Choice and Identification of Social Interactions (September 2012). CEPR Discussion Paper No. DP9159. Available at SSRN: https://ssrn.com/abstract=2155529

Ethan Cohen-Cole (Contact Author)

Econ One Research ( email )

United States

Xiaodong Liu

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States

HOME PAGE: http://spot.colorado.edu/~xiaodong/

Yves Zenou

Monash University - Department of Economics ( email )

Australia

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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