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Peer Effects, Cooperation and Competition in Human Capital Formation


  • Román Andrés Zárate



Economic literature has identified positive effects of peer abilities on individual achievement. However, the intuitive arguments supporting this evidence are not clear. This article presents a specific mechanism: cooperation and competition among group members; more precisely, the presence of positive and negative externalities in human capital accumulation. First, I develop an economic model that incorporates both kinds of externalities and shows the existence of an optimal level of competition between group members that maximizes human capital accumulation. Then, using data from PISA (2000) and an empirical strategy that controls for potential endogeneity issues, I find empirical evidence supporting the main results of the theoretical model. Namely, I find robust evidence of a non-linear effect of competition on academic performance. These results are consistent with the proposed model and the presence of positivetechnological externalities in educational production functions.

Suggested Citation

  • Román Andrés Zárate, 2012. "Peer Effects, Cooperation and Competition in Human Capital Formation," DOCUMENTOS CEDE 009795, UNIVERSIDAD DE LOS ANDES-CEDE.
  • Handle: RePEc:col:000089:009795

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    References listed on IDEAS

    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Becker, William E. & Rosen, Sherwin, 1992. "The learning effect of assessment and evaluation in high school," Economics of Education Review, Elsevier, vol. 11(2), pages 107-118, June.
    3. Massimiliano Bratti & Daniele Checchi & Antonio Filippin, 2011. "Should you compete or cooperate with your schoolmates?," Education Economics, Taylor & Francis Journals, vol. 19(3), pages 275-289.
    4. Schwieren, Christiane & Weichselbaumer, Doris, 2010. "Does competition enhance performance or cheating? A laboratory experiment," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 241-253, June.
    5. Knoef, Marike & Kooreman, Peter, 2011. "The Effects of Cooperation: A Structural Model of Siblings' Caregiving Interactions," IZA Discussion Papers 5733, Institute for the Study of Labor (IZA).
    6. Steven Yamarik, 2007. "Does Cooperative Learning Improve Student Learning Outcomes?," The Journal of Economic Education, Taylor & Francis Journals, vol. 38(3), pages 259-277, July.
    7. Esther Duflo & Pascaline Dupas & Michael Kremer, 2011. "Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya," American Economic Review, American Economic Association, vol. 101(5), pages 1739-1774, August.
    8. Daniel Mejía & Marc St-Pierre, 2007. "Human capital formation, inequality, and competition for jobs," DOCUMENTOS CEDE 004105, UNIVERSIDAD DE LOS ANDES-CEDE.
    9. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    10. Foster, Gigi, 2006. "It's not your peers, and it's not your friends: Some progress toward understanding the educational peer effect mechanism," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1455-1475, September.
    11. M. Bigoni & M. Fort & M. Nardotto & T. Reggiani, 2011. "Teams or Tournaments? A Field Experiment on Cooperation and Competition in Academic Achievement," Working Papers wp752, Dipartimento Scienze Economiche, Universita' di Bologna.
    12. Dan T. Rosenbaum, 2000. "Ability, Educational Ranks, and Labor Market Trends: The Effects of Shifts in the Skill Composition of Educational Groups," JCPR Working Papers 146, Northwestern University/University of Chicago Joint Center for Poverty Research.
    13. Giorgio Brunello & Maria De Paola & Vincenzo Scoppa, 2010. "Peer Effects In Higher Education: Does The Field Of Study Matter?," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 621-634, July.
    14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item


    Peer effects; Cooperation; Competition; PISA;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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