Working Paper: CEPR ID: DP17315
Authors: Vincent Boucher; Michelle Rendall; Philip Ushchev; Yves Zenou
Abstract: There is substantial empirical evidence showing that peer effects matter in many activities. The workhorse model in empirical work on peer effects is the linear-in-means (LIM) model, whereby it is assumed that agents are linearly affected by the mean action of their peers. We provide two different theoretical models (based on spillovers and on conformism behavior) that microfound the LIM model and show that they have very different policy implications. We also develop a new general model of peer effects that relaxes the assumptions of linearity and mean peer behavior and that encompasses the spillover, conformist model, and LIM model as special cases. Then, using data on adolescent activities in the U.S., we structurally estimate this model. We find that for GPA, social clubs, self-esteem, and exercise, the spillover effect strongly dominates, while for risky behavior, study effort, fighting, smoking, and drinking, conformism plays a stronger role. We also find that for many activities, individuals do not behave according to the LIM model. We run some counterfactual policies and show that imposing the mean action as an individual social norm is misleading and leads to incorrect policy implications.
Keywords: peer effects; spillovers; conformism; structural estimation; policies
JEL Codes: C31; D04; D85; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Counterfactual policy simulations (C54) | Targeted interventions (I24) |
| Peer behaviors (C92) | Individual outcomes (I14) |
| Spillover effects (F69) | Individual benefits (J32) |
| Conformism (D70) | Negative utility from deviating from peers' behaviors (C92) |
| Peer interactions (spillover vs conformism) (C92) | Policy implications (D78) |
| LIM model (C24) | Erroneous policy implications (D78) |
| Peer influence varies across contexts (C92) | Incorrect policy recommendations (D78) |