DP14141 Social Interaction Methods

Author(s): Chih-Sheng Hsieh, Xu Lin, Eleonora Patacchini
Publication Date: November 2019
Date Revised: December 2019
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Programme Areas: Public Economics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14141

This paper is concerned with methods for analyzing social interaction effects. The attention is focused on how to estimate endogenous effects, where an individual's choice may depend on those of his/her contacts about the same activity. The analysis is guided by the data structure that is available to measure social interactions, an intuitive aspect that allows empirical researchers to understand whether and how they could study social interaction effects in their own data. First, the case where the information on social interaction patterns is limited to membership to a given group is considered, then the discussion moves to the case where the data contain information on specific relationships among pairs of individuals within each group, and the availability of data on the co-evolution of social structures and outcomes. This paper also discusses some basic methods to deal with online social network data, and the novel literature estimating social interaction effects relying only on outcome data. For each data structure, the challenges and the main methods proposed in the literature to tackle them are reviewed.