Multinomial Choice with Social Interactions: Occupations in Victorian London

30 Pages Posted: 26 Jul 2017

See all articles by José-Alberto Guerra

José-Alberto Guerra

Universidad de los Andes, Colombia - Department of Economics

Myra Mohnen

University of Ottawa - Department of Economics; University of Essex - Department of Economics

Date Written: July 7, 2017

Abstract

This paper presents a multinomial choice model with social interactions in an incomplete network. Individuals form heterogenous rational expectations about the behavior of peers by taking into account their characteristics and the strength of their ties. We show the network conditions under which the endogenous and exogenous effects can be separately identified even in the presence of correlated effects at the group level. Conditions for unique equilibrium are established. We apply our empirical model to occupational choice in nineteenth century London. Thanks to a newly constructed dataset, we use ecclesiastical parish boundaries as proxies for social groups and geographic distances between individuals as measures of the strength of their ties. Our results show that endogenous network effects were important above and beyond correlated and exogenous effects. We uncover distinct impact by occupation type: peers in professional and industrial occupations have a positive impact on the likelihood of following a similar occupation while commercial have a negative one.

Keywords: Social interactions, Heterogeneous beliefs, Multinomial choice, Occupational choice

JEL Classification: C25, C31, J24, N93

Suggested Citation

Guerra, José Alberto and Mohnen, Myra, Multinomial Choice with Social Interactions: Occupations in Victorian London (July 7, 2017). Documento CEDE No. 2017-47, Available at SSRN: https://ssrn.com/abstract=3007765 or http://dx.doi.org/10.2139/ssrn.3007765

José Alberto Guerra (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

HOME PAGE: http://jguerraforero.wixsite.com/joseaguerra

Myra Mohnen

University of Ottawa - Department of Economics ( email )

Social Sciences Building Room 9005
Ottawa, Ontario K1N 6N5
Canada

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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