Working Paper: NBER ID: w13038
Authors: Bruce A. Weinberg
Abstract: This paper develops a model of social interactions with endogenous association. People are assumed to invest in relationships to maximize their utility. Even in a linear-in-means model, when associations are endogenous, the effect of macro-group composition on behavior is non-linear and varies across individuals. We also show that larger groups facilitate sorting. Using data on associations among high school students, we provide a range of evidence consistent with our model. Individuals associate with people whose behaviors and characteristics are similar to their own. This tendency is stronger in large groups. We also show that behaviors vary within and between macro-groups in the way predicted by endogenous association.
Keywords: social interactions; endogenous associations; behavioral economics; youth behaviors
JEL Codes: I21; I32; J15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| individuals invest in relationships (D14) | maximize their utility (D11) |
| individual behaviors (D01) | influenced by own behaviors and those of associates (C92) |
| macrogroup composition (E10) | individual behaviors (D01) |
| individual characteristics (Z13) | composition of the group (D71) |
| similar behaviors and characteristics (C92) | homophily (C92) |
| larger groups (C92) | sorting of individuals (C69) |
| associates' behaviors (C92) | individual behaviors (D01) |
| availability of similar individuals (J79) | likelihood of adopting behaviors (C92) |