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Heterogeneous Peer Effects and Rank Concerns: Theory and Evidence

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  • Michela Maria Tincani

Abstract

Using a theoretical model where students care about achievement rank, I study effort choices in the classroom and show that rank concerns generate peer effects. The model’s key empirical prediction is that the effect on own achievement of increasing the dispersion in peer cost of effort is heterogeneous, depending on a student’s own cost of effort. To test this, I construct a longitudinal multi-cohort dataset of students, with data on the geographic propagation of building damages from the Chilean 2010 earthquake. I find that higher dispersion in home damages among one’s classmates led, on average, to lower own Mathematics and Spanish test scores. To be able to test the theory, I develop a novel nonlinear difference-in-differences model that estimates effect heterogeneity and that relates observed damages to unobserved cost of effort. I find that some students at the tails of the predicted cost of effort distribution benefit from higher dispersion in peer cost of effort, as predicted by the theoretical model. This finding suggests that observed peer effects on test scores are, at least partly, governed by rank concerns.

Suggested Citation

  • Michela Maria Tincani, 2017. "Heterogeneous Peer Effects and Rank Concerns: Theory and Evidence," CESifo Working Paper Series 6331, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6331
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp6331.pdf
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    References listed on IDEAS

    as
    1. Azmat, Ghazala & Iriberri, Nagore, 2010. "The importance of relative performance feedback information: Evidence from a natural experiment using high school students," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 435-452, August.
    2. repec:ucp:jlabec:doi:10.1086/690714 is not listed on IDEAS
    3. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
    4. Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782-813.
    5. Victor Lavy & M. Daniele Paserman & Analia Schlosser, 2012. "Inside the Black Box of Ability Peer Effects: Evidence from Variation in the Proportion of Low Achievers in the Classroom," Economic Journal, Royal Economic Society, vol. 122(559), pages 208-237, March.
    6. Robert Garlick, 2018. "Academic Peer Effects with Different Group Assignment Policies: Residential Tracking versus Random Assignment," American Economic Journal: Applied Economics, American Economic Association, vol. 10(3), pages 345-369, July.
    7. Elsner, Benjamin & Isphording, Ingo E., 2015. "Rank, Sex, Drugs, and Crime," IZA Discussion Papers 9478, Institute for the Study of Labor (IZA).
    8. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    9. Giacomo De Giorgi & Michele Pellizzari & Silvia Redaelli, 2010. "Identification of Social Interactions through Partially Overlapping Peer Groups," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 241-275, April.
    10. Richard Murphy & Felix Weinhardt, 2014. "Top of the Class: The Importance of Ordinal Rank," CESifo Working Paper Series 4815, CESifo Group Munich.
    11. Scott E. Carrell & Bruce I. Sacerdote & James E. West, 2013. "From Natural Variation to Optimal Policy? The Importance of Endogenous Peer Group Formation," Econometrica, Econometric Society, vol. 81(3), pages 855-882, May.
    12. Kang, Changhui, 2007. "Classroom peer effects and academic achievement: Quasi-randomization evidence from South Korea," Journal of Urban Economics, Elsevier, vol. 61(3), pages 458-495, May.
    13. Benjamin Elsner & Ingo E. Isphording, 2017. "A Big Fish in a Small Pond: Ability Rank and Human Capital Investment," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 787-828.
    14. Jane Cooley Fruehwirth, 2014. "Can Achievement Peer Effect Estimates Inform Policy? A View from Inside the Black Box," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 514-523, July.
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    Cited by:

    1. Ballatore, Rosario Maria & Paccagnella, Marco & Tonello, Marco, 2017. "Bullied because younger than my mates? The effect of age rank on victimization at school," GLO Discussion Paper Series 116, Global Labor Organization (GLO).

    More about this item

    Keywords

    ability peer effects; rank preferences; semiparametric model;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • I29 - Health, Education, and Welfare - - Education - - - Other

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