Sensitivity Bounds and Conservative Inference for Contagion under Latent Homophily

Abstract

Whether connected units are similar because influence spreads across ties or because similar units form ties is a long standing problem. We study a fixed network with two waves of nodal outcomes. Rather than positing a parametric model for network formation, we consider identification of contagion under latent homophily as a selection bias problem. We define a focal component controlled direct effect (CDE) that holds a tie present, changes one alter's lagged outcome, and permits dependence on the remaining fixed network background. We show that the gap between the CDE and the observed connected dyad risk ratio is governed by how strongly a latent variable shifts the composition of connected dyads. Under stated mean exchangeability and sensitivity restrictions, we develop interpretable nonparametric bounds for the primary naturally connected target. For inference conditional on the observed network and baseline outcomes, heterogeneous dyad specific means can invalidate the usual inclusion exclusion variance estimator; we establish asymptotically conservative one sided limits under conditional actor dissociation and stated regularity conditions. A simulation study characterizes the bounds' error control and power. We apply the framework to the 2008 U.S. House votes on the Troubled Asset Relief Program. The connected contrast among legislators suggests vote contagion and survives mild latent homophily and outcome susceptibility.