Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299926 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16998
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Peer influence on effort devoted to some activity is often studied using proxy variables when actual effort is unobserved. For instance, in education, academic effort is often proxied by GPA. We propose an alternative approach that circumvents this approximation. Our framework distinguishes unobserved shocks to GPA that do not affect effort from preference shocks that do affect effort levels. We show that peer effects estimates obtained using our approach can differ significantly from classical estimates (where effort is approximated) if the network includes isolated students. Applying our approach to data on high school students in the United States, we find that peer effect estimates relying on GPA as a proxy for effort are 40% lower than those obtained using our approach.
Subjects: 
social networks
peer effects
academic achievement
unobserved effort
isolated agents
JEL: 
C31
J24
Document Type: 
Working Paper

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