Specification and estimation of social interaction models with network structures

Abstract

Summary: This paper considers the specification and estimation of social interaction models with network structures and the presence of endogenous, contextual and correlated effects. With macro group settings, group-specific fixed effects are also incorporated in the model. The network structure provides information on the identification of the various interaction effects. We propose a quasi-maximum likelihood approach for the estimation of the model. We derive the asymptotic distribution of the proposed estimator, and provide Monte Carlo evidence on its small sample performance. © The Author(s). Journal compilation © Royal Economic Society 2010.