Peer Group Effects and Educational Attainment
Given the aims of an educational system, the relationship between inputs and output, a distribution of student ability, and a fixed budget, how should students and expenditures be allocated over classrooms? This paper focuses on peer effects and the determinants of whether streaming or mixing is preferable. The efficient allocation is highly sensitive to the form in which peer group effects enter. This emphasizes the need for flexible functional forms in estimating educational production functions.
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