TY - JOUR
AU - Graham, Bryan S
TI - An econometric model of link formation with degree heterogeneity
JF - National Bureau of Economic Research Working Paper Series
VL - No. 20341
PY - 2014
Y2 - July 2014
DO - 10.3386/w20341
UR - http://www.nber.org/papers/w20341
L1 - http://www.nber.org/papers/w20341.pdf
N1 - Author contact info:
Bryan S. Graham
University of California - Berkeley
530 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: (510) 642 4752
E-Mail: bgraham@econ.berkeley.edu
AB -
I introduce a model of undirected dyadic link formation which allows for assortative matching on observed agent characteristics (homophily) as well as unrestricted agent level heterogeneity in link surplus (degree heterogeneity). Like in fixed effects panel data analyses, the joint distribution of observed and unobserved agent-level characteristics is left unrestricted. Two estimators for the (common) homophily parameter, `beta_0`, are developed and their properties studied under an asymptotic sequence involving a single network growing large. The first, tetrad logit (TL), estimator conditions on a sufficient statistic for the degree heterogeneity. The second, joint maximum likelihood (JML), estimator treats the degree heterogeneity ` {A_(i0)}_(i=1)^N` as additional (incidental) parameters to be estimated. The TL estimate is consistent under both sparse and dense graph sequences, whereas consistency of the JML estimate is shown only under dense graph sequences.
ER -