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GMM identification and estimation of peer effects in a system of simultaneous equations

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  • Xiaodong Liu

    (University of Colorado Boulder)

Abstract

This paper considers the identification and estimation of network models with agents interacting in multiple activities. We establish the model identification using both linear and quadratic moment conditions. The quadratic moment conditions exploit the correlation of individual decisions within and across different activities, and provide an additional channel to identify peer effects. Combining linear and quadratic moment conditions, we propose a general GMM framework for the estimation of simultaneous equations network models. The GMM estimator improves the asymptotic efficiency of the existing IV-based linear estimators in the literature. Simulation experiments show that the GMM estimator performs well in finite samples.

Suggested Citation

  • Xiaodong Liu, 2020. "GMM identification and estimation of peer effects in a system of simultaneous equations," Journal of Spatial Econometrics, Springer, vol. 1(1), pages 1-27, December.
    • Handle: RePEc:spr:jospat:v:1:y:2020:i:1:d:10.1007_s43071-020-0001-4
    DOI: 10.1007/s43071-020-0001-4
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    Cited by:

    1. Peter H. Egger & Ingmar R. Prucha, 2023. "Refined GMM estimators for simultaneous equations models with network interactions," Empirical Economics, Springer, vol. 64(6), pages 2535-2542, June.
    2. Marius C. O. Amba, 2021. "Simultaneous Equations with Three Way Error Components," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(3), pages 583-596, September.

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    More about this item

    Keywords

    Social networks; Quadratic moment conditions; Efficiency; Many-instrument bias;
    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
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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