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Identification and Estimation of Outcome Response with Heterogeneous Treatment Externalities

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This paper studies the identification and estimation of treatment response with heterogeneous spillovers in a network model. We generalize the standard linear-in-means model to allow for multiple groups with between and within-group interactions. We provide a set of identification conditions of peer effects and consider a 2SLS estimation approach. Large sample properties of the proposed estimators are derived. Simulation experiments show that the estimators perform well in finite samples. The model is used to study the effectiveness of policies where peer effects are seen as a mechanism through which the treatments could propagate through the network. When interactions among groups are at work, a shock on a treated group has effects on the non-treated. Our framework allows for quantifying how much of the indirect treatment effect is due to variations in the characteristics of treated peers (treatment contextual effects) and how much is because of variations in peer outcomes (peer effects).

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  • Eleonora Patacchini & Tiziano Arduini & Edoardo Rainone, 2014. "Identification and Estimation of Outcome Response with Heterogeneous Treatment Externalities," Center for Policy Research Working Papers 167, Center for Policy Research, Maxwell School, Syracuse University.
    • Handle: RePEc:max:cprwps:167
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    1. Patacchini, Eleonora & Rainone, Edoardo & Zenou, Yves, 2017. "Heterogeneous peer effects in education," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 190-227.
    2. Rokhaya Dieye & Bernard Fortin, 2017. "Gender Peer Effects Heterogeneity in Obesity," Cahiers de recherche 1702, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    3. Cao, Y. & Swallow, B. & Qiu, F., 2018. "Does Municipal Development Policy Affect Property Values: A Quasi-Experimental Hedonic Model Approach in Alberta, Canada," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277044, International Association of Agricultural Economists.
    4. Boucher, Vincent & Dedewanou, F. Antoine & Dufays, Arnaud, 2022. "Peer-induced beliefs regarding college participation," Economics of Education Review, Elsevier, vol. 90(C).
    5. Rainone, Edoardo, 2020. "The network nature of over-the-counter interest rates," Journal of Financial Markets, Elsevier, vol. 47(C).
    6. Hsieh, Chih-Sheng & Lin, Xu, 2017. "Gender and racial peer effects with endogenous network formation," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 135-147.

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    More about this item

    Keywords

    Networks; Heterogeneous Peer Effects; Spatial Autoregressive Model; Two-Stage Least Squares; Efficiency; Policy Evaluation; Treatment Response; Indirect Treatment Effect;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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