The Value of a Peer

Category: Applied Microeconomics and Organization Seminar
When: 29 May 2019
, 17:15
 - 18:30

The Value of a Peer

Ingo Isphording (IZA), Ulf Zölitz (University of Zurich)


This paper introduces a new approach to peer effects: Peer value-added isolates the total contribution of an individual to the performance of others without relying on observable peer characteristics as measures of peer quality. Using data from a setting with repeated random assignment of students to peer groups we show that there is significant variation in peers’ value-added. Peer observable characteristics, most notably previous performance, are poor predictors of individual spillovers. We validate our peer value-added measures in out-of-sample social interactions and show that peer value-added captures performance and earnings spillovers among randomly re-assigned peers. We establish that the ability to raise others’ performance is a malleable trait. Students interacting with peers generating positive spillovers become more valuable peers themselves. We show that peer and teacher quality are substitutes and that high value-added peers can compensate for a bottom quintile value-added instructor.