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Future Blog Post

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Blog Post number 1

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portfolio

publications

A dynamic model of job networking and persistent inequality

Heterogenous Agents, Interactions and Economic Performance, 2003

Although it rarely appears in economic models, job networking is a common feature of labour market behaviour. This paper develops a model of the macroeconomic implications of job networking for the behaviour of employment rates in an economy or community. I find that the spillovers created by networking produce a highly nonlinear relationship between community human capital and community employment rates. The model can be applied to understand the emergence of a low-employment “underclass” community in which even highly skilled or motivated individuals face severe employment difficulties.

Recommended citation: Krauth, Brian (2003). "A dynamic model of job networking and persistent inequality." In Cowan R., Jonard N. (eds) Heterogenous Agents, Interactions and Economic Performance, Lecture Notes in Economics and Mathematical Systems, vol 521. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-55651-7_12

A dynamic model of job networking and social influences on employment

Journal of Economic Dynamics and Control, 2004

This paper explores an economy in which personal connections facilitate job search. In the model, a firm receives information on the productivity of those job applicants with social ties to its current employees. In addition to providing a theory of networking, the model endogenously generates two classic theories in economic sociology. First, there is a highly non-linear relationship between average human capital in a group of socially connected individuals and the group’s employment rate. Small changes in group composition may cause large changes in employment, as suggested in Wilson’s ‘social isolation’ explanation for high unemployment rates among poor African-Americans. The model also supports Granovetter’s ‘strength of weak ties’ hypothesis, which holds that acquaintances are more valuable job contacts than close friends.

Recommended citation: Krauth, Brian (2004). "A dynamic model of job networking and social influences on employment." Journal of Economic Dynamics and Control. 28(6). https://doi.org/10.1016/S0165-1889(03)00079-4

Peer effects and selection effects on smoking among Canadian youth

Canadian Journal of Economics, 2005

A number of studies have indicated that peer smoking is a highly influential factor in a young person’s decision to smoke. However, this finding is suspect, because the studies often fail to account for selection and simultaneity bias. This paper develops an econometric model of youth smoking that incorporates both peer effects and selection effects. Identification is achieved by using the degree of selection on observables as a proxy for the degree of selection on unobservables. The results indicate that peers have some influence on a young person’s decision to smoke, but that influence is much weaker than is suggested by reduced form models.

Recommended citation: Krauth, Brian (2005). "Peer effects and selection effects on smoking among Canadian youth." Canadian Journal of Economics. 38(3). https://doi.org/10.1111/j.0008-4085.2005.00300.x

Structural estimation of peer effects in youth smoking

Advances in Health Economics and Health Services Research, 2005

This chapter in a conference volume provides an overview for a somewhat more general audience of my research (published elsewhere) using simulation-based methods to measure peer effects in youth smoking.

Recommended citation: Krauth, Brian (2005). "Structural estimation of peer effects in youth smoking." Advances in Health Economics and Health Services Research. 16. https://www.emerald.com/insight/content/doi/10.1016/S0731-2199(05)16009-9/full/html

Social interactions in small groups

Canadian Journal of Economics, 2006

In the well-known ‘critical mass’ model of social interactions, aggregate behaviour exhibits multiple equilibria if the influence of group behaviour on individual behaviour exceeds some fairly high threshold. I demonstrate that this property depends on an implicit assumption that the relevant social group is large (infinite). With small (finite) social groups, the same model exhibits multiplicity whenever group behaviour exerts any influence. The range of equilibrium group behaviour depends on the size of the social group as well as its strength of influence. Brief applications on youth smoking and retirement planning demonstrate the implications of these results for applied work.

Recommended citation: Krauth, Brian (2006). "Social interactions in small groups." Canadian Journal of Economics. 39(2). https://doi.org/10.1111/j.0008-4085.2006.00353.x

Simulation-based estimation of peer effects

Journal of Econometrics, 2006

The influence of peer behavior on an individual’s choices has received renewed interest in recent years. However, accurate measures of this influence are difficult to obtain. Standard reduced-form methods lead to upwardly biased estimates due to simultaneity, common shocks, and nonrandom peer group selection. This paper describes a structural econometric model of peer effects in binary choice, as well as a simulated maximum likelihood estimator for its parameters. The model is nonparametrically identified under plausible restrictions, and can place informative bounds on parameter values under much weaker restrictions. Monte Carlo results indicate that this estimator performs better than a reduced form approach in a wide variety of settings. A brief application to youth smoking demonstrates the method and suggests that previous studies dramatically overstate peer influence.

Recommended citation: Krauth, Brian (2006). "Simulation-based estimation of peer effects." Journal of Econometrics. 133(1). https://doi.org/10.1016/j.jeconom.2005.03.015

Peer and selection effects on youth smoking in California

Journal of Business & Economic Statistics, 2007

Previous research has found that youth smoking choices are strongly influenced by peer smoking. However, these studies often fail to account for simultaneity and nonrandom peer selection. This article describes an equilibrium model of peer effects that incorporates both of these features, and estimates its parameters using data on California teenagers. Identification is aided by using the influence of observable variables on group selection as a proxy for the influence of unobservables. I find that the effect of peer smoking on the decision to smoke is much weaker than found in previous studies.

Recommended citation: Krauth, Brian (2007). "Peer and selection effects on youth smoking in California." Journal of Business & Economic Statistics. 25(3). https://doi.org/10.1198/073500106000000396

Sorting and inequality in Canadian schools

Journal of Public Economics, 2007

A student’s peers are often thought to influence his or her educational outcomes. If so, an unequal distribution of advantaged and disadvantaged students across schools (‘sorting’) in a community will amplify existing inequalities. This paper explores the relationship between the degree of sorting across schools within a community and educational inequality as measured by the variance of standardized high school exam scores within the community. Cross-sectional OLS estimates suggest that the variance of test scores is related to sorting by ethnicity, but not to sorting by income or parental education. We then implement two strategies for addressing endogeneity in the degree of sorting: a standard unobserved effects (first-difference) approach, and a first-difference/instrumental variables approach in which the structure of school choice (number and relative size of schools) is used to construct instruments for the degree of sorting. The results from both approaches indicate that the variance of test scores is related to sorting by home language and parental education, but not to sorting by income. Our results also suggest that reducing sorting would have little effect on inequality of outcomes in the typical Alberta community, but would have substantial effects in the larger cities.

Recommended citation: Friesen, Jane and Brian Krauth (2007). "Sorting and inequality in Canadian schools." Journal of Public Economics. 91(11-12). https://doi.org/10.1016/j.jpubeco.2007.03.003

Disabled peers and academic achievement

Education Finance and Policy, 2010

We use data on students in grades 4–7 in the Canadian province of British Columbia to investigate the effect of having disabled peers on value-added exam outcomes. Longitudinal data for multiple cohorts of students are used together with school-by-grade-level fixed effects to account for endogenous selection into schools. Our estimates suggest that same-grade peers with learning and behavioral disabilities have an adverse effect on the test score gains of nondisabled students in British Columbia. However, these effects are statistically insignificant and are sufficiently small that they are unlikely to raise concerns about the placement of this group of disabled students. The effect of peers with other disabilities is also small and statistically insignificant but varies in sign.

Recommended citation: Hickey, Ross, Jane Friesen and Brian Krauth (2010). "Disabled peers and academic achievement." Education Finance and Policy. 5(3). https://doi.org/10.1162/EDFP_a_00003

Sorting, peers, and achievement of Aboriginal students in British Columbia

Canadian Journal of Economics, 2010

We examine the contribution of differences in school environments to the gap in education outcomes between Aboriginal and non‐Aboriginal students. We find both substantial school‐level segregation of Aboriginal and non‐Aboriginal students and a substantial gap in test scores. Conventional achievement gap decompositions attribute roughly half of the grade 7 test score gap to between‐school differences and half to within‐school differences. The segregation of Aboriginal students suggests that peer effects might explain some of these between‐school achievement differences. However, we find that peer effects associated with a greater proportion of Aboriginal peers, if anything, improve value‐added exam outcomes of Aboriginal students.

Recommended citation: Friesen, Jane and Brian Krauth (2010). "Sorting, peers, and achievement of Aboriginal students in British Columbia." Canadian Journal of Economics. 43(4). https://doi.org/10.1111/j.1540-5982.2010.01614.x

Non-standard English dialects and the effect of supplementary funding on educational achievement

Canadian Journal of Speech-Language Pathology and Audiology, 2011

This article provides a non-technical summary for a wider audience of the research results reported in our 2014 CPP paper.

Recommended citation: Battisti, Michele, Mark Campbell, Jane Friesen and Brian Krauth (2011). "Non-standard English dialects and the effect of supplementary funding on educational achievement." Canadian Journal of Speech-Language Pathology and Audiology. 35(2). https://ldatschool.ca/wp-content/uploads/2015/06/CJSLPA_2011_Vol_35_No_02_Summer.pdf#page=90

Ethnic enclaves in the classroom

Labour Economics, 2011

We use data on elementary-school students to investigate how the home language and other characteristics of a student’s same-grade schoolmates influence that student’s academic achievement. We exploit the availability of multiple cohorts of data within each school to control for endogenous selection by incorporating school fixed effects in the model. We also exploit the longitudinal structure of the data to estimate value-added models of the educational production function. We find that attending an “enclave” school provides a slight net benefit to Chinese home-language students and a large net cost to Punjabi home language students. The results are consistent with a simple peer effects mechanism in which the academic achievement or behavior of peers is much more important than their home language.

Recommended citation: Friesen, Jane and Brian Krauth (2011). "Ethnic enclaves in the classroom." Labour Economics. 18(5). https://doi.org/10.1016/j.labeco.2011.01.005

English as a Second Dialect policy and achievement of Aboriginal students in British Columbia

Canadian Public Policy, 2014

Since the 1980s, the BC Ministry of Education has offered funding to support the language development of students who speak non-standard dialects of English. In practice, the students who are supported by this funding are almost exclusively Aboriginal, and English as a Second Dialect (ESD) funding has grown to be an important source of supplemental funding for Aboriginal students in many school districts. We exploit the staggered uptake of ESD funding by school districts to identify its effect on academic achievement. We find a sizable positive effect of ESD on grade seven reading achievement among Aboriginal students.

Recommended citation: Battisti, Michele, Jane Friesen and Brian Krauth (2014). "English as a Second Dialect policy and achievement of Aboriginal Students in British Columbia." Canadian Public Policy. 40(2). https://doi.org/10.3138/cpp.2012-093

Bounding a linear causal effect using relative correlation restrictions

Journal of Econometric Methods, 2016

This paper describes and implements a simple partial solution to the most common problem in applied microeconometrics: estimating a linear causal effect with a potentially endogenous explanatory variable and no suitable instrumental variables. Empirical researchers faced with this situation can either assume away the endogeneity or accept that the effect of interest is not identified. This paper describes a middle ground in which the researcher assumes plausible but nontrivial restrictions on the correlation between the variable of interest and relevant unobserved variables relative to the correlation between the variable of interest and observed control variables. Given such relative correlation restrictions, the researcher can then estimate informative bounds on the effect and assess the sensitivity of conventional estimates to plausible deviations from exogeneity. Two empirical applications demonstrate the potential usefulness of this method for both experimental and observational data.

Recommended citation: Krauth, Brian (2016). "Bounding a linear causal effect using relative correlation restrictions." Journal of Econometric Methods. 5(1). https://doi.org/10.1515/jem-2013-0013

The effect of universal full-day Kindergarten on children’s behavior

Working paper, 2018

We exploit the staggered rollout of universal full-day Kindergarten (FDK) to estimate its effects on children’s behavior and related family outcomes. Our research design identifies these effects by comparing across-cohort changes in outcomes among early versus late adopting schools. We find little effect of FDK on child behavior or parents’ mental health, and an increase in hours worked by parents who are employed part-time. These results hold across a range of child and family characteristics, with one exception. In families who do not speak English at home, FDK reduces child hyperactivity and peer relationship problems, improves parents’ mental health and increases employment and hours.

Recommended citation: Friesen, Jane, Brian Krauth, and Reza Sattari (2018). "The effect of universal full-day Kindergarten on children’s behavior." Working paper, Simon Fraser University.

Job satisfaction and co‐worker pay in Canadian firms

Canadian Journal of Economics, 2020

One reason to be concerned about income inequality is the idea that people care about not only their own absolute income but also their income relative to various reference groups (co‐workers, friends, neighbours, relatives, etc.). We use Canadian linked employer–employee data to estimate the casual effect of co‐worker pay on a worker’s reported job and pay satisfaction. Since worker satisfaction can affect the worker’s productivity, organizational commitment, turnover, creativity and innovation as well as the firm’s productivity and profitability, this is an issue that requires more attention and careful examination. In models that control for a rich set of workplace characteristics, we find that co‐worker pay has a large positive and significant effect on both pay and job satisfaction. In our preferred models with establishment‐level fixed effects, the effect of co‐worker pay on pay satisfaction is half as large and the effect on job satisfaction completely disappears, suggesting that part (all) of what previous studies attribute to the effect of co‐worker pay on worker pay (job) satisfaction is driven by unobserved heterogeneity across firms or establishments. Our results also suggest that the effect of co‐worker pay on worker satisfaction is much stronger for workers who leave their job during the following year. Finally, we find that while co‐worker pay has a positive effect on pay satisfaction among Canadian‐born whites, it has a negative effect among immigrants and Canadian‐born visible minorities.

Recommended citation: Javdani, Mohsen and Brian Krauth (2020). "Job satisfaction and co‐worker pay in Canadian firms." Canadian Journal of Economics. 53(1). https://doi.org/10.1111/caje.12422

The effect of universal full-day Kindergarten on student achievement

Working paper, 2022

We estimate the effect of introducing universal full-day Kindergarten (FDK) on subsequent Grade 4 test scores. The data are from the Canadian province of British Columbia, which moved from mostly half-day to universal full-day Kindergarten between the 2010/11 and 2011/12 academic years. We exploit the staggered timing of the policy implementation using a difference-in-differences research design. Our point estimates for the average effect of FDK on achievement are mostly positive, occasionally statistically significant, and always small. The effect is substantially larger among students who speak English as a second language, a result that is consistent with prior findings.

Recommended citation: Friesen, Jane, Brian Krauth, and Ricardo Meilman Cohn (2022). "The effect of full-day Kindergarten on student achievement." Working paper, Simon Fraser University. https://bvkrauth.github.io/publication/fdk_fsa

Peers as treatments

Working paper, 2022

Models of social interactions are often estimated under the strong assumption that an individual’s choices are a direct function of the average observed characteristics of his or her reference group. This paper interprets social interactions in a less restrictive potential outcomes framework in which interaction with a given peer or peer group is considered a treatment with an unknown treatment effect. In this framework, conventional peer effect regressions can be interpreted as characterizing treatment effect heterogeneity. This framework is then used to clarify identification and interpretation of commonly-used peer effect models and to suggest avenues for improving upon them.

Recommended citation: Krauth, Brian (2022). "Peers as treatments." Working paper, Simon Fraser University. https://bvkrauth.github.io/publication/peertreat

software

talks

Social interactions, thresholds, and unemployment in neighborhoods

Published:

This paper establishes a stylized fact about unemployment in U.S. urban neighborhoods: the relationship between average human capital and the unemployment rate in a given neighborhood is highly nonlinear. Specifically, the predicted unemployment rate for a neighborhood increases dramatically when the fraction of neighborhood residents with college degrees falls below twenty percent. This pattern appears across all of the major U.S. cities. I then use a simple model of neighborhood selection and neighborhood effects on employment to evaluate ‘epidemic’ and ‘sorting’ explanations for this stylized fact.

Recommended citation: Krauth, Brian (2000). "Social interactions, thresholds, and unemployment in neighborhoods." Working paper. http://www.sfu.ca/~bkrauth/papers/social.pdf

Peers and prices: Explaining the black-white youth smoking gap

Published:

In 1976, black and white teenagers in the United States were about equally likely to be cigarette smokers. By the early 1990’s, the smoking rate of black teenagers had dropped to one-third that of white teenagers. This paper analyzes the role of peers, prices, and other factors in explaining this divergence in behavior. I find that the dynamics of youth smoking can best be explained by the combination of rising prices in the 1980’s, a higher price elasticity for black teenagers, and the amplifying effects of social interactions (peer effects). In the process, I develop and implement several empirical tools for the analysis of the equilibrium implications of social interactions. In particular, I develop a procedure for determining whether peer influence is strong enough to produce multiple equilibria, and a procedure for estimating the ‘social multiplier’ associated with peer effects. I find that the multiple equilibria explanation is not empirically supported, but that the social multiplier effect is large enough to account for roughly half the difference in smoking rates.

Recommended citation: Krauth, Brian (2001). "Peers and prices: Explaining the black-white youth smoking gap." Working paper. http://www.sfu.ca/~bkrauth/papers/smoke.pdf

Maximum likelihood estimation of social interaction effects with nonrandom group selection

Published:

This paper derives a maximum likelihood estimator for an econometric model of discrete choice with social interaction effects. Endogenous selection of reference group is addressed within the econometric model through the incorporation of a reduced form within-group correlation in both observed and unobserved characteristics. The estimator requires only standard survey data which provides information on a binary choice made by the respondent, a vector of the respondent’s background characteristics, and the average choice made by a large reference group (for example, school or census tract). Properties of the estimator are demonstrated analytically and through Monte Carlo experiments.

Recommended citation: Krauth, Brian (2004). "Maximum likelihood estimation of social interaction effects with nonrandom group selection." Working paper. http://www.sfu.ca/~bkrauth/papers/smlbig.pdf

teaching

ECON 835: Econometrics

Graduate, Simon Fraser University, Economics Department, 2017

An introduction to econometric theory. Applications of econometric methods to both time series and cross-section data.

ECON 105: Principles of Macroeconomics

Undergaduate, Simon Fraser University, Economics Department, 2018

The principal elements of theory concerning money and income, distribution, social accounts, public finance, international trade, comparative systems, and development and growth.

ECON 900: PhD Field Paper

Graduate seminar, Simon Fraser University, Economics Department, 2021

In the summer term following the completion of a PhD student’s theory comprehensive exams, the student will enrol in this course. In consultations between the student, the graduate chair, and faculty, the student will be assigned a supervisor for the course. During the term, the student will write a research paper in their field of interest. A satisfactory completion of the course is through the presentation of the paper as an economics department thesis proposal seminar. Graded as satisfactory or unsatisfactory.

ECON 233: Introduction to Economic Data and Statistics

Undergaduate, Simon Fraser University, Economics Department, 2021

Introduces statistical methods, concepts and their application to economic data using both spreadsheets (e.g., Excel) and a specialized statistical programming language such as R.

ECON 381: Labour Economics

Undergaduate, Simon Fraser University, Economics Department, 2021

Analysis of the economics of the labor market with particular emphasis on wage determination, the concept of full employment, and manpower policies.

unpublished

Social interactions, thresholds, and unemployment in neighborhoods

Unpublished, 2000

This paper establishes a stylized fact about unemployment in U.S. urban neighborhoods: the relationship between average human capital and the unemployment rate in a given neighborhood is highly nonlinear. Specifically, the predicted unemployment rate for a neighborhood increases dramatically when the fraction of neighborhood residents with college degrees falls below twenty percent. This pattern appears across all of the major U.S. cities. I then use a simple model of neighborhood selection and neighborhood effects on employment to evaluate ‘epidemic’ and ‘sorting’ explanations for this stylized fact.

Recommended citation: Krauth, Brian (2000). "Social interactions, thresholds, and unemployment in neighborhoods." Working paper. https://www.sfu.ca/~bkrauth/papers/social.pdf

Peers and prices: Explaining the black-white youth smoking gap

Unpublished, 2001

In 1976, black and white teenagers in the United States were about equally likely to be cigarette smokers. By the early 1990’s, the smoking rate of black teenagers had dropped to one-third that of white teenagers. This paper analyzes the role of peers, prices, and other factors in explaining this divergence in behavior. I find that the dynamics of youth smoking can best be explained by the combination of rising prices in the 1980’s, a higher price elasticity for black teenagers, and the amplifying effects of social interactions (peer effects). In the process, I develop and implement several empirical tools for the analysis of the equilibrium implications of social interactions. In particular, I develop a procedure for determining whether peer influence is strong enough to produce multiple equilibria, and a procedure for estimating the ‘social multiplier’ associated with peer effects. I find that the multiple equilibria explanation is not empirically supported, but that the social multiplier effect is large enough to account for roughly half the difference in smoking rates.

Recommended citation: Krauth, Brian (2001). "Peers and prices: Explaining the black-white youth smoking gap." Working paper. https://www.sfu.ca/~bkrauth/papers/smoke.pdf

Maximum likelihood estimation of social interaction effects with nonrandom group selection

Unpublished, 2004

This paper derives a maximum likelihood estimator for an econometric model of discrete choice with social interaction effects. Endogenous selection of reference group is addressed within the econometric model through the incorporation of a reduced form within-group correlation in both observed and unobserved characteristics. The estimator requires only standard survey data which provides information on a binary choice made by the respondent, a vector of the respondent’s background characteristics, and the average choice made by a large reference group (for example, school or census tract). Properties of the estimator are demonstrated analytically and through Monte Carlo experiments.

Recommended citation: Krauth, Brian (2004). "Maximum likelihood estimation of social interaction effects with nonrandom group selection." Working paper. https://www.sfu.ca/~bkrauth/papers/smlbig.pdf