A discrete-choice model with social interactions: with an application to high school teen behavior
Article first published online: 19 APR 2007
Copyright © 2007 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 22, Issue 3, pages 599–624, April/May 2007
How to Cite
Soetevent, A. R. and Kooreman, P. (2007), A discrete-choice model with social interactions: with an application to high school teen behavior. J. Appl. Econ., 22: 599–624. doi: 10.1002/jae.924
- Issue published online: 19 APR 2007
- Article first published online: 19 APR 2007
- Manuscript Revised: 18 DEC 2005
- Manuscript Received: 13 DEC 2004
- MacArthur Research Network on Social Interactions and Economic Inequality
- Netherlands Organization for Scientific Research (NWO)
We develop an empirical discrete-choice interaction model with a finite number of agents. We characterize its equilibrium properties—in particular the correspondence between interaction strength, number of agents, and the set of equilibria—and propose to estimate the model by means of simulation methods. In an empirical application, we analyze the individual behavior of high school teenagers in almost 500 school classes from 70 schools. In our baseline model endogenous social interaction effects are strong for behavior closely related to school (truancy), somewhat weaker for behavior partly related to school (smoking, cell phone ownership, and moped ownership) and absent for behavior far away from school (asking parents' permission for purchases). Intra-gender interactions are generally much stronger than cross-gender interactions. In a model with school-specific fixed effects social interaction effects are insignificant, with the exception of intra-gender interactions for truancy. Copyright © 2007 John Wiley & Sons, Ltd.