The Use of Instrumental Variables in Peer Effects Models | Zendy

Hinke Stephanie | Zendy; Leckie George | Zendy; Nicoletti Cheti | Zendy

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The Use of Instrumental Variables in Peer Effects Models

Author(s) -

Hinke Stephanie,

Leckie George,

Nicoletti Cheti

Publication year - 2019

Publication title -

oxford bulletin of economics and statistics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.131

H-Index - 73

eISSN - 1468-0084

pISSN - 0305-9049

DOI - 10.1111/obes.12299

Subject(s) - instrumental variable , peer effects , econometrics , psychology , peer review , outcome (game theory) , variables , variable (mathematics) , statistics , economics , social psychology , mathematics , biology , mathematical analysis , biochemistry , mathematical economics

Instrumental variables are often used to identify peer effects. This paper shows that instrumenting the ‘peer average outcome’ with ‘peer average characteristics’ requires the researcher to include the instrument at the individual level as an explanatory variable. We highlight the bias that occurs when failing to do this.

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