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An Estimable Model of Production Interactions in Endogenous Networks

Author

Listed:
  • Pellizzari, Michele
  • De Giorgi, Giacomo
  • Rodríguez Barraquer, Tomás

Abstract

We propose a model where forward-looking agents first decide to form links with each other and, then, engage in a production activity jointly with their linked peers. Exogenous linking opportunities facilitate the creation of network connections and the return to productive effort varies with the personal attributes of the connected agents. We apply our model to a purposely built dataset of college students containing information on the endogeneous networks of study partners linked with administrative records on the students’ characteristics and academic performance. Identification relies upon the random assignment of students to classrooms, which generates exogenous opportunities for socialisation. Using the estimated structural parameters, we investigate the implications of two counterfactual experiments, one where students are streamed into classes by ability and one with single-sex classes.

Suggested Citation

  • Pellizzari, Michele & De Giorgi, Giacomo & Rodríguez Barraquer, Tomás, 2020. "An Estimable Model of Production Interactions in Endogenous Networks," CEPR Discussion Papers 15461, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15461
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    References listed on IDEAS

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    1. Esther Duflo & Pascaline Dupas & Michael Kremer, 2011. "Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya," American Economic Review, American Economic Association, vol. 101(5), pages 1739-1774, August.
    2. Giacomo De Giorgi & Michele Pellizzari & Silvia Redaelli, 2010. "Identification of Social Interactions through Partially Overlapping Peer Groups," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 241-275, April.
    3. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
    4. Patrick Bayer & Randi Hjalmarsson & David Pozen, 2009. "Building Criminal Capital behind Bars: Peer Effects in Juvenile Corrections," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 105-147.
    5. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    6. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 681-704.
    7. Bryan S. Graham, 2017. "An Econometric Model of Network Formation With Degree Heterogeneity," Econometrica, Econometric Society, vol. 85, pages 1033-1063, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Networks; Production; Estimation; Counterfactual; Education;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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