Penalized likelihood resolves non-existence of MLE and incidental-parameter bias in network models with degree heterogeneity while allowing sparse networks and providing asymptotic guarantees.
Bagging the Network
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abstract
We develop a unified estimation and inference framework for dyadic network formation with individual fixed effects, covering both transferable-utility (TU) and nontransferable-utility (NTU) links under general link functions. Under NTU, bilateral consent makes the fixed effects non-additive and the log-likelihood non-concave in the high-dimensional fixed effects, so differencing and profile-likelihood methods fail. We combine a joint method-of-moments initial estimator, a Le Cam one-step refinement, and a split-network jackknife bagging step that removes the incidental parameter bias without inflating variance. The resulting homophily estimator is asymptotically normal, unbiased, and attains the Cram\'er--Rao lower bound without requiring the log-likelihood to be concave in the fixed effects; we extend the theory to average partial effects and establish robustness to link-function misspecification. Simulations under both TU and NTU designs confirm these predictions. Applied to Thai village networks (TU), kinship and wealth differences both increase linking; in the Nyakatoke risk-sharing network (NTU), wealth differences have no significant effect, mirroring the two regimes' distinct logics.
fields
econ.EM 1years
2026 1verdicts
UNVERDICTED 1representative citing papers
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Penalized Likelihood for Dyadic Network Formation Models with Degree Heterogeneity
Penalized likelihood resolves non-existence of MLE and incidental-parameter bias in network models with degree heterogeneity while allowing sparse networks and providing asymptotic guarantees.