Journal
REVIEW OF ECONOMICS AND STATISTICS
Volume 103, Issue 2, Pages 328-345Publisher
MIT PRESS
DOI: 10.1162/rest_a_00870
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Funding
- Ministry of Education of the Republic of Korea
- National Research Foundation of Korea [NRF-2017S1A5A2A01023679]
- National Research Foundation of Korea [2017S1A5A2A01023679] Funding Source: Korea Institute of Science & Technology Information (KISTI), National Science & Technology Information Service (NTIS)
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This paper proposes two methods to estimate the linear-in-means model of peer effects, controlling for the endogeneity of social connections using a control function approach. The authors leave the functional form of the control function unspecified and establish asymptotics of the semiparametric estimator.
We propose methods of estimating the linear-in-means model of peer effects in which the peer group, defined by a social network, is endogenous in the outcome equation for peer effects. Endogeneity is due to unobservable individual characteristics that influence both link formation in the network and the outcome of interest. We propose two estimators of the peer effect equation that control for the endogeneity of the social connections using a control function approach. We leave the functional form of the control function unspecified, estimate the model using a sieve semiparametric approach and establish asymptotics of the semiparametric estimator.
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