NCPA - National Center for Policy Analysis

Peer Effects

November 26, 2001

How productive are investments in education? In answering this question, one tricky problem is "peer effects." Students are "good" peers if they produce positive learning spillovers, so that other students exposed to them gain more for each dollar spent on their education, or "bad" peers if they have the reverse effect.

In "Peer Effects in the Classroom: Learning From Gender and Race Variation," Caroline Hoxby tries to determine whether peer effects exist and, if they do, how large they are. True peer effects are hard to measure because of the activities of both parents and schools.

  • Parents who provide home environments that are good for learning tend to select the same schools.
  • Students with similar abilities may be assigned to the same classroom in order to make it easier to teach.
  • Teachers with a knack for handling unruly students may have classes full of them.

Hoxby found some gains to low achievers by being with high achievers and losses among high achievers by being with low achievers. After taking steps to eliminate changes in achievement that could be caused by general time trends or unusual events -- such as the appearance of an especially good teacher in one school -- she concludes on average, a student's own test score rises by 0.10 to 0.55 points when he or she is surrounded by peers who score one point higher.

Source: Linda Gorman, "Peer Effects in the Classroom," NBER Digest, April 2001; based on Caroline Hoxby, "Peer Effects in the Classroom: Learning From Gender and Race Variation," NBER Working Paper No. 7867, August 2000, National Bureau of Economic Research.

For NBER Digest text


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