Working Paper

Abstract

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.