Specification and estimation of social interaction models with network structures

This paper considers the specification and estimation of social interaction models with network structures and the presence of endogenous, contextual and correlated effects. With macro group settings, group‐specific fixed effects are also incorporated in the model. The network structure provides information on the identification of the various interaction effects. We propose a quasi‐maximum likelihood approach for the estimation of the model. We derive the asymptotic distribution of the proposed estimator, and provide Monte Carlo evidence on its small sample performance.