The use of instrumental variables in peer effects models

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Instrumental variables are often used to identify peer effects. This paper shows that
instrumenting the \peer average outcome" with \peer average characteristics" requires the researcher to include the instrument at the individual level as an explanatory variable. We highlight the bias that occurs when failing to do this.
Original languageEnglish
JournalOxford Bulletin of Economics and Statistics
Early online date4 Feb 2019
Publication statusE-pub ahead of print - 4 Feb 2019

Bibliographical note

©2019 The Authors.


  • Instrumental variables
  • Peer effects
  • Bias

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