From Natural Variation to Optimal Policy? The Lucas Critique Meets Peer Effects
We take cohorts of entering freshmen at the United States Air Force Academy and assign half to peer groups with the goal of maximizing the academic performance of the lowest ability students. Our assignment algorithm uses peer effects estimates from the observational data. We find a negative and significant treatment effect for the students we intended to help. We show that within our "optimal" peer groups, students self-selected into bifurcated sub-groups with social dynamics entirely different from those in the observational data. Our results suggest that using reduced-form estimates to make out-of-sample policy predictions can lead to unanticipated outcomes.
|Date of creation:||Mar 2011|
|Publication status:||published as “ From Natural Variation to Optimal Policy? The Importance of Endogenous Peer Group Formation ,” Econometrica , 81(3): 855 - 882 , 2013 . (with B. Sacerdote and J. West)|
|Note:||CH ED LS PE|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Bryan S. Graham & Guido W. Imbens & Geert Ridder, 2014. "Complementarity and aggregate implications of assortative matching: A nonparametric analysis," Quantitative Economics, Econometric Society, vol. 5, pages 29-66, 03.
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- David J. Zimmerman, 2003. "Peer Effects in Academic Outcomes: Evidence from a Natural Experiment," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 9-23, February.
- Zimmerman, David J., 1999. "Peer Effects in Academic Outcomes: Evidence From a Natural Experiment," Williams Project on the Economics of Higher Education DP-52, Department of Economics, Williams College.
- 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. Full references (including those not matched with items on IDEAS)
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