2023/07/21 by Stéphane Bonhomme, Bonhomme, Stéphane, Kevin Dano +1
Business, Management and Accounting · Social Sciences · #Econometrics (econ.EM) #FOS: Economics and business #Social Capital and Networks #Wine Industry and Tourism
paper · pdf · doi:10.48550/arxiv.2307.11484
openalex publication_date 2023/07/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Economic interactions often occur in networks where heterogeneous agents (such as workers or firms) sort and produce. However, most existing estimation approaches either require the network to be dense, which is at odds with many empirical networks, or they require restricting the form of heterogeneity and the network formation process. We show how the functional differencing approach introduced by Bonhomme (2012) in the context of panel data, can be applied in network settings to derive moment restrictions on model parameters and average effects. Those restrictions are valid irrespective of the form of heterogeneity, and they hold in both dense and sparse networks. We illustrate the analysis with linear and nonlinear models of matched employer-employee data, in the spirit of the model introduced by Abowd, Kramarz, and Margolis (1999).