The perils of peer effects

Joshua Angrist

Labour Economics, 2014, vol. 30, issue C, 98-108

Abstract: Individual outcomes are highly correlated with group average outcomes, a fact often interpreted as a causal peer effect. Without covariates, however, outcome-on-outcome peer effects are vacuous, either unity or, if the average is defined as a leave-out mean, determined by a generic intraclass correlation coefficient. When pre-determined peer characteristics are introduced as covariates in a model linking individual outcomes with group averages, the question of whether peer effects or social spillovers exist is econometrically identical to that of whether a 2SLS estimator using group dummies to instrument individual characteristics differs from OLS estimates of the effect of these characteristics. The interpretation of results from models that rely solely on chance variation in peer groups is therefore complicated by bias from weak instruments. With systematic variation in group composition, the weak IV issue falls away, but the resulting 2SLS estimates can be expected to exceed the corresponding OLS estimates as a result of measurement error and for other reasons unrelated to social effects. Research designs that manipulate peer characteristics in a manner unrelated to individual characteristics provide the most compelling evidence on the nature of social spillovers. As an empirical matter, designs of this sort have mostly uncovered little in the way of socially significant causal effects.

Keywords: Causality; Social returns; Instrumental variables (search for similar items in EconPapers)
JEL-codes: C18 C31 C36 I21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (349)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927537114000712
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Perils of Peer Effects (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:30:y:2014:i:c:p:98-108

DOI: 10.1016/j.labeco.2014.05.008

Access Statistics for this article

Labour Economics is currently edited by A. Ichino

More articles in Labour Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().