The Application of a System of Simultaneous Equations to an Innovation Diffusion Model

Abstract

The use of systems of simultaneous equations to describe social behavior, extensive in econometrics, appears to have promise for explaining behavior in other social sciences as well. Two problems that may arise with the use of such equations are (1) identification, and (2) estimation. This paper considers the problem of identification and extends the methodology to include a description of the Theil-Basmann method of estimation. A specific model concerning the diffusion of technical innovations is formulated and tested. The results suggest that variables in the model represent an interdependent system.