How (not) to Choose Peers in Studying Groups
AbstractThis paper analyzes social group formation when agents are subject to peer effects within groups increasing human capital and instantaneous utility. When agents are heterogeneous on two dimensions, ability and social skills, and monetary payments are not feasible the model predicts segregation at the top and at the bottom of the attribute space and bunching for heterogeneous intermediate types. Groups may be heterogeneous in taste types and more heterogeneous types are more likely to participate. The equilibrium allocation does not induce cost-efficient human capital accumulation. Introducing ability tracking may produce beneficial results despite decreasing differences in human capital production.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.79.
Date of creation: May 2006
Date of revision:
Education; Peer-effects; Matching; Group Formation;
Find related papers by JEL classification:
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-21 (All new papers)
- NEP-EDU-2006-07-21 (Education)
- NEP-SOC-2006-07-21 (Social Norms & Social Capital)
- NEP-URE-2006-07-21 (Urban & Real Estate Economics)
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