Peer effects in college: how peers' performance can influence students' academic outcomes

This paper investigates the existence of peer effects in academic outcomes by exploring specificities in the student's admission process of a Brazilian federal university, which works as a natural experiment. Individuals who are comparable in terms of previous academic achievement end up having classmates with better or worse performance in college because of the assignment rule of students to classrooms. Thus, our identification strategy for estimating peer effects on academic outcomes eliminates the endogenous self-selection into groups that would otherwise undermine the causal inference of peer effects. Overall, our findings showed that joining a class with high-ability students damages academic achievements of the lowest-ability students at UFMG. Although male and female students are both negatively affected by being in the first (better) class, we found gender differences. Specifically, being at the bottom of the better class make females take less radical decisions compared to male students in the sense that female students continue to study even though with lower performance (reduced GPA and credits earned) while male students seem to be more prone towards dropping out (increased number of subjects – or even University registration – cancelled and reduced attendance in classroom). We have also found other heterogeneities in peer effects in college in terms of class shift, period of admission, area of study and parents’ education. This study is a necessary step before investigating the impact of peer quality on after-graduating decisions using the same natural experiment. This will allow us to deepen our understanding of how peer effects can also have long-lasting impacts.