Heterogeneous peer effects under endogenous selection: An application to local and migrant children in elementary schools in Shanghai

• Published in: China economic review Vol. 87; p. 102207
• Main Authors: Chen, Yuanyuan, Feng, Shuaizhang, Yang, Chao
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.10.2024
• Subjects: Education; Migrant children; Peer effects; Sample selection; C31; Peer effects; Sample selection; Education; C34; Migrant children; I21
• ISSN: 1043-951X
• DOI: 10.1016/j.chieco.2024.102207

This paper develops a model that allows for heterogenous contemporaneous peer effects among different types of agents who are endogenously selected into different peer groups. We apply our approach to migrant and local students in Shanghai, where local students all go to public schools, but migrant students are endogenously selected into either public schools or lower-quality private schools. The results suggest large contemporaneous peer effects among all student groups. We conduct policy experiments to examine the effect of transferring migrant students from private schools to public schools, and show that peer effect can be substantially more important than the school effect. •We develop a model to estimate heterogenous contemporaneous peer effects among different types of agents.•A school enrollment policy is used to instrument endogenous school selection.•Large contemporaneous peer effects are observed among all student groups.•The “reduced-form” peer effect specification is a special case of our model.•Policy simulation suggests that peer effects are more important than the school effects.