Network formation with unobserved homophily: Identification and evidence from Bangladeshi
* 주관: 서울대학교 경제학부, 경제연구소 한국경제혁신센터, SSK, BK21
* 본 세미나는 BK21+(2023-1학기) 세미나 참석으로 인정됩니다.
- 세미나 참석인정을 원하는 학생은 세미나 종료 후 참석자 명단을 작성해주시기 바랍니다.
Abstract: We study the formation of networks among agents whose preferences exhibit degree heterogeneity and homophily in both observed and unobserved characteristics. The presence of unobserved homophily complicates the identification of coefficients related to observed homophily. To address this challenge, we propose a two-step approach. In the first step, we construct tetrad-level inequalities in which degree heterogeneity is canceled out. In the second step, the observed and unobserved homophily parameters are identified by the availability of an instrument and a proxy. Using a unique two-period network dataset, collected after a field experiment in Bangladesh, we empirically investigate students’ homophilic preferences. We utilize the differences in eigenvector centrality between students and between their parents from the previous year, respectively, as a proxy and an instrument to account for homophily in unobserved personality. Our results suggest that observed homophily estimates could be substantially biased if unobserved homophily is not properly taken into account.