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Towards a General Theory of Peer Effects

Author

Listed:
  • Boucher, Vincent

    (Université Laval)

  • Rendall, Michelle

    (Monash University)

  • Ushchev, Philip

    (Higher School of Economics (HSE))

  • Zenou, Yves

    (Monash University)

Abstract

There is substantial empirical evidence showing that peer effects matter in many activities. The workhorse model in empirical work on peer effects is the linear-in-means (LIM) model, whereby it is assumed that agents are linearly affected by the mean action of their peers. We develop a new general model of peer effects that relaxes the linear assumption of the best-reply functions and the mean peer behavior and that encompasses the spillover, conformist model, and LIM model as special cases. Then, using data on adolescent activities in the U.S., we structurally estimate this model. We find that for many activities, individuals do not behave according to the LIM model. We run some counterfactual policies and show that imposing the mean action as an individual social norm is misleading and leads to incorrect policy implications.

Suggested Citation

  • Boucher, Vincent & Rendall, Michelle & Ushchev, Philip & Zenou, Yves, 2023. "Towards a General Theory of Peer Effects," IZA Discussion Papers 16354, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16354
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    References listed on IDEAS

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    1. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
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    More about this item

    Keywords

    conformism; spillovers; peer effects; policies;
    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
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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