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Multinomial choice with social interactions: occupations in Victorian London

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  • José-Alberto Guerra
  • Myra Mohnen

Abstract

This paper presents a multinomial choice model with social interactions in an incomplete network. Individuals form heterogenous rational expectations about the behavior of peers by taking into account their characteristics and the strength of their ties. We show the network conditions under which the endogenous and exogenous effects can be separately identified even in the presence of correlated effects at the group level. Conditions for unique equilibrium are established. We apply our empirical model to occupational choice in nineteenth century London. Thanks to a newly constructed dataset, we use ecclesiastical parish boundaries as proxies for social groups and geographic distances between individuals as measures of the strength of their ties. Our results show that endogenous network effects were important above and beyond correlated and exogenous effects. We uncover distinct impact by occupation type: peers in professional and industrial occupations have a positive impact on the likelihood of following a similar occupation while commercial have a negative one.

Suggested Citation

  • José-Alberto Guerra & Myra Mohnen, 2017. "Multinomial choice with social interactions: occupations in Victorian London," Documentos CEDE 15667, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:015667
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    More about this item

    Keywords

    Social interactions; Heterogeneous beliefs; Multinomial choice; Occupational choice;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • 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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • N93 - Economic History - - Regional and Urban History - - - Europe: Pre-1913

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