Measuring Social Interactions

Abstract

This paper presents an overview of the economics that lies behind social interaction models and briefly discusses the empirical approaches to social interactions. We present a simple model with local interactions, similar to Glaeser, Sacerdote and Scheinkman (1996) but using aa continuous action space and starting with optimizing behavior. We then extend the model to include both global and local interactions. We suggest and use a methodology for using variation of intra-city aggregates to identify the relative sizes of local and global interactions. We also present a model with endogenous location choice and use the predictions of that model to identify the sources of cross-city variance that are due to sorting and interaction. Finally, we present a brief discussion of using time-series to estimate the social interactions in broad aggregates.