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Reference Dependent Aspirations and Peer Effects in Education

Author

Listed:
  • Fongoni, Marco

    (Aix Marseille University)

  • Norris, Jonathan

    (University of Strathclyde)

  • Romiti, Agnese

    (University of Strathclyde)

  • Shi, Zhan

    (University of Kent)

Abstract

We study the long-run effects of income inequality within adolescent peer compositions in schools. We propose a theoretical framework based on reference dependence where inequality in peer groups can generate aspiration gaps. Guided by predictions from this framework we find that an increase in the share of low-income peers within school-cohorts improves the educational outcomes of low-income students and has negative effects on high-income students. We further document a range of evidence that corroborates these results, including that they are distinct from peer non-linear ability effects. We then find that social cohesion, through better connections in the school network, has an important role in mitigating the effects of peer inequality. Our results provide evidence on the role of inequality in peer groups for long-run educational outcomes, while also demonstrating that there is potential to avoid these consequences.

Suggested Citation

  • Fongoni, Marco & Norris, Jonathan & Romiti, Agnese & Shi, Zhan, 2022. "Reference Dependent Aspirations and Peer Effects in Education," IZA Discussion Papers 15785, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp15785
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    References listed on IDEAS

    as
    1. Stefan Wager & Susan Athey, 2018. "Estimation and Inference of Heterogeneous Treatment Effects using Random Forests," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 113(523), pages 1228-1242, July.
    2. Zhao, Liqiu & Zhao, Zhong, 2021. "Disruptive Peers in the Classroom and Students’ Academic Outcomes: Evidence and Mechanisms," Labour Economics, Elsevier, vol. 68(C).
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    Cited by:

    1. Duc, Julien & Poirier, Côme, 2024. "The optimal role model," Economics Letters, Elsevier, vol. 234(C).

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    Keywords

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    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I29 - Health, Education, and Welfare - - Education - - - Other
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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