Identification and Estimation of Outcome Response with Heterogeneous Treatment Externalities

48 Pages Posted: 17 Jan 2015

See all articles by Tiziano Arduini

Tiziano Arduini

University of Bologna-Department of Economics

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ; IZA Institute of Labor Economics

Edoardo Rainone

Bank of Italy

Date Written: September 26, 2014

Abstract

This paper studies the identification and estimation of treatment response with heterogeneous spillovers in a network model. We generalize the standard linear-in-means model to allow for multiple groups with between and within-group interactions. We provide a set of identification conditions of peer effects and consider a 2SLS estimation approach. Large sample properties of the proposed estimators are derived. Simulation experiments show that the estimators perform well in finite samples. The model is used to study the effectiveness of policies where peer effects are seen as a mechanism through which the treatments could propagate through the network. When interactions among groups are at work, a shock on a treated group has effects on the non-treated. Our framework allows for quantifying how much of the indirect treatment effect is due to variations in the characteristics of treated peers (treatment contextual effects) and how much is because of variations in peer outcomes (peer effects).

Keywords: networks, heterogeneous peer effects, spatial autoregressive model, two-stage least squares, efficiency, policy evaluation, treatment response, indirect treatment effect

JEL Classification: C13, C21, D62

Suggested Citation

Arduini, Tiziano and Patacchini, Eleonora and Rainone, Edoardo, Identification and Estimation of Outcome Response with Heterogeneous Treatment Externalities (September 26, 2014). Bank of Italy Temi di Discussione (Working Paper) No. 974. Available at SSRN: https://ssrn.com/abstract=2550759 or http://dx.doi.org/10.2139/ssrn.2550759

Tiziano Arduini

University of Bologna-Department of Economics ( email )

Piazzale Scaravilli 2
Bologna, 40126
Italy

HOME PAGE: http://https://sites.google.com/site/tizianoarduini/

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

IZA Institute of Labor Economics ( email )

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

Edoardo Rainone (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Register to save articles to
your library

Register

Paper statistics

Downloads
65
Abstract Views
453
rank
348,360
PlumX Metrics