Peer Effects, Social Networks, and Healthcare Demand

Abstract

Social networks are complex processes that many hypothesize are vital to human health, both mentally and physically. Policymakers and firms in the healthcare industry regularly try to exploit these pathways in their design of programs and policies that aim to improve the health status of individuals and the population. Not surprisingly, there has also been a surge of interest among academic health economists considering the role of peer effects and social networks in areas ranging from the demand for healthcare and health insurance as well as understanding decisions to both engage, and continue to engage in risky health behaviors. Specifically, recent years have been characterized by a boom in research focusing on the identification of peer effects and their processes as well as an exploration of consequences of peer effects. Studies are both empirical and theoretical. Several high-profile papers examining obesity called attention to the importance of social influence (or ‘contagion’) that travels along/within networks, but their validity and robustness of the principal findings have since come under intense debate. The authors suggest that future research will focus more heavily on social networks that model the structure of social ties between individuals including as opposed to the traditional use of heavily aggregated peer effect measures. This research will be driven by an increasing number of data sources that provide detailed information on the communication and connectivity among members of a social network. Further, researchers will continue to adopt a broad array of methodological approaches ranging from field experiments to cluster approaches to alternative statistical and econometric strategies including instrumental variables estimators to not only identify and estimate the existence of social influences on health outcomes but also to pinpoint the underlying mechanism.