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American Economic Journal: Applied Economics: Vol. 2 No. 2 (April 2010)

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Identification of Social Interactions through Partially Overlapping Peer Groups

Article Citation

De Giorgi, Giacomo, Michele Pellizzari, and Silvia Redaelli. 2010. "Identification of Social Interactions through Partially Overlapping Peer Groups." American Economic Journal: Applied Economics, 2(2): 241-75.

DOI: 10.1257/app.2.2.241

Abstract

In this paper, we demonstrate that, in a context where peer groups do not overlap fully, it is possible to identify all the relevant parameters of the standard linear-in-means model of social interactions. We apply this novel identification structure to study peer effects in the choice of college major. Results show that one is more likely to choose a major when many of her peers make the same choice. We also show that peers can divert students from majors in which they have a relative ability advantage, with adverse consequences on academic performance, entry wages, and job satisfaction. (JEL I23, J24, J31, Z13)

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Authors

De Giorgi, Giacomo (Stanford U)
Pellizzari, Michele (Bocconi U and IGIER)
Redaelli, Silvia (Bocconi U)

JEL Classifications

I23: Higher Education and Research Institutions
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J31: Wage Level and Structure; Wage Differentials
Z13: Economic Sociology; Economic Anthropology; Social and Economic Stratification

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