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Uncovering heterogeneous social effects in binary choices

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  • Lin, Zhongjian
  • Tang, Xun
  • Yu, Ning Neil

Abstract

We identify and estimate heterogeneous social effects within groups of individuals that make binary choices. These heterogeneous social effects, which include peer and contextual effects, are modeled through unobserved influence matrices that summarize how the members within each group affect each other’s outcomes. We recover parameters in social effects as well as the unknown influence matrices by exploiting how these matrices are linked to the reduced-form effects of multiple characteristics. Monte Carlo experiments show that a nested fixed-point maximum-likelihood estimator for the social effects has good finite-sample performance. Using a new dataset, we analyze how college roommates influence each other’s decisions to participate in volunteering activities. Our estimates reveal substantial heterogeneity in the social effects among these students.

Suggested Citation

  • Lin, Zhongjian & Tang, Xun & Yu, Ning Neil, 2021. "Uncovering heterogeneous social effects in binary choices," Journal of Econometrics, Elsevier, vol. 222(2), pages 959-973.
    • Handle: RePEc:eee:econom:v:222:y:2021:i:2:p:959-973
    DOI: 10.1016/j.jeconom.2020.08.005
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    2. Lambotte, Mathieu & Mathy, Sandrine & Risch, Anna & Treibich, Carole, 2023. "Disentangling peer effects in transportation mode choice: The example of active commuting," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).

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    More about this item

    Keywords

    Heterogeneous social effect; Peer effect; Exclusion restriction; Binary choice; Volunteering;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate

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