Endogenous peer effects in diverse friendship networks: Evidence from Swedish classrooms

Do students benefit differently from interacting with similar and diverse peers? Using register-linked survey data from a stratified sample of Swedish classrooms I test whether endogenous peer effects in student achievement are heterogeneous by immigrant status. My empirical strategy combines instrumental variables, classroom fixed effects, and a control function to identify the parameter of interest separately from contextual and correlated effects. In particular, by considering partially overlapping networks of peers and family members, I use peers’ parents’ education as instruments for peer behaviour. My findings suggest that endogenous effects are limited to interactions with native peers only, but benefit both native and migrant students. High-ability children of migrants appear to be particularly vulnerable to friendship segregation.