Identification of Peer Effects through Social Networks

CIRPEE Working Paper No. 07-05

IZA Discussion Paper No. 2652

43 Pages Posted: 28 Feb 2007

See all articles by Yann Bramoulle

Yann Bramoulle

Université Laval - Département d'Économique

Habiba Djebbari

Université Laval - Département d'Économique; IZA Institute of Labor Economics

Bernard Fortin

Université Laval - Département d'Économique; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: March 2007

Abstract

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).

Keywords: Social networks, Peer effects, identification, reflection problem

JEL Classification: D85, L14, Z13, C3

Suggested Citation

Bramoulle, Yann and Djebbari, Habiba and Fortin, Bernard, Identification of Peer Effects through Social Networks (March 2007). CIRPEE Working Paper No. 07-05; IZA Discussion Paper No. 2652. Available at SSRN: https://ssrn.com/abstract=965818

Yann Bramoulle (Contact Author)

Université Laval - Département d'Économique ( email )

Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Habiba Djebbari

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

IZA Institute of Labor Economics

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

Bernard Fortin

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-5678 (Phone)
418-656-7798 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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

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