Social and Behavioral Sciences Commons^™

Identification And Estimation Of Outcome Response With Heterogeneous Treatment Externalities, Tiziano Arduini, Eleonora Patacchini, Edoardo Rainone

Center for Policy Research

This paper studies the identification and estimation of treatment response with heterogeneous spillovers in a network model. We generalize the standard linear-in-means model to allow for multiple groups with between and within-group interactions. We provide a set of identification conditions of peer effects and consider a 2SLS estimation approach. Large sample properties of the proposed estimators are derived. Simulation experiments show that the estimators perform well in finite samples. The model is used to study the effectiveness of policies where peer effects are seen as a mechanism through which the treatments could propagate through the network. When interactions among groups …