Gender and racial peer effects with endogenous network formation

We apply a high order spatial autoregressive (SAR) model to simultaneously capture heterogeneous peer effects from multiple gender and racial groups, as well as endogenous network formation. In students’ GPA and smoking behaviors, we find that within-gender endogenous effects are stronger than cross-gender effects. Females and whites are more sensitive to peer influences and more influential than other students. Intra-race spillover effects are stronger than inter-race effects for whites, but not for non-whites. Homophily on observed and unobserved characteristics are important for friendship formation. However, the formation of friendship is not necessary motivated by common interest in outcomes such as smoking. Our findings suggest that coeducational or desegregated schooling may help increase academic achievement, but not reduce smoking frequency.