identiyfing peer effects on behaviour is tricky for lots of reasons particularly as people will sort together on many observable and unobservable characteristics. the literature has tried various ways to examine exogenous sources of peer variation such as examining the effect of background factors of randomly assigned flatmates in college (e.g. Sacerdote, Bruce (2001). ‘Peer effect with random assignment: results for Dartmouth roomates’, Quarterly Journal of Economics, vol. 116(2), pp. 681–704.
CrossRef, ISI, JSTOR.)
a recent paper in the EJ tries the following identifcation strategy (quoted below from the article)
“Our first identification strategy relies on variation across neighbourhoods in the proportion of adolescents born at the beginning (or at the end) of the year. As discussed below, the date of birth within the year is an important determinant of French children's early performance at school and is plausibly exogenous to the quality of the neighbourhood in which they live. In such a context, one simple way to identify the influence of neighbours is to test whether children's performance at school is affected by the distribution of dates of birth within the year of the other children living in the same neighbourhood. As shown below, the answer is positive. Regardless of their own date of birth, children living in a neighbourhood with a relatively high proportion of children born at the beginning of the year perform significantly better than children living in a neighbourhood with a relatively high proportion of children born at the end of the year.”
http://www.blackwell-synergy.com/doi/full/10.1111/j.1468-0297.2007.02079.x
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