The Social Multiplier

In many cases, aggregate data is used to make inferences about individual level behavior. If there are social interactions in which one person’s actions influence his neighbor’s incentives or information, then these inferences are inappropriate. The presence of positive social interactions, or strategic complementarities, implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities. We present a brief model and then estimate the size of the social multiplier in three areas: the impact of education on wages, the impact of demographics on crime and group membership among Dartmouth roommates. In all three areas there appears to be a significant social multiplier. Edward L. Glaeser Bruce I. Sacerdote Department of Economics 6106 Rockefeller Hall 315 A Littauer Center Department of Economics Harvard University Dartmouth College Cambridge, MA 02138 Hanover, NH 03755 and NBER and NBER [email protected] [email protected] Jose A. Scheinkman Princeton University