Center for Policy Research
A Panel Data Model with Generalized Higher-Order Network Effects
Badi H. Baltagi, Sophia Ding, Peter H. Egger
C.P.R. Working Paper No. 233
Badi H. Baltagi
Many data situations require the consideration of network effects among the cross-sectional units of observation. In this paper, the authors present a generalized panel model which accounts for two features: (i) three types of network effects on the right-hand side of the model, namely through weighted dependent variable, weighted exogenous variables, as well as weighted error components, and (ii) higher-order network effects due to ex-ante unknown network-decay functions or the presence of multiplex (or multi-layer) networks among all of those. The authors outline the model, the basic assumptions, and present simulation results.