Testing Unilateral and Bilateral Link Formation

Authors


  • We thank Michael Wooldridge for his useful suggestions and Joachim De Weerdt for making the data available. We have benefited from useful comments from Yann Bramoullé and from seminar participants at the Paris School of Economics, Oxford University, University of Nottingham, Stanford and Yale. All remaining errors are our own.

Abstract

Empirical analysis of social networks is often based on self-reported links from survey data. How we interpret such data is crucial for drawing correct inference on network effects. We propose a method for testing whether survey responses can safely be interpreted as a link and, if so, whether links are generated by a unilateral or bilateral link formation process. We present two empirical illustrations of the test on risk-sharing links in Tanzania and on communication among Indian farmers, respectively, demonstrating the ability of the methodology to discriminate between competing data-generating processes.

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