Identification of Peer Effects using Panel Data

This paper provides new identification results for panel data models with contextual and endogenous peer effects, respectively operating through individual heterogeneity and outcomes. The results apply for general network structures governing peer interactions, and hinge on a conditional mean restriction requiring exogenous mobility of individuals between groups over time. Some networks preclude identification, in which case we propose additional conditional variance restrictions. We apply our method to surgeon-hospital-year data to study take-up of keyhole surgery, finding a positive effect of the average individual heterogeneity of peers. This effect is equally due to endogenous and contextual effects