Heterogeneous effects of high school peers on educational outcomes

We investigate peer ability effects on high powered test scores at ages 16 and 18, and on the probability of university attendance. To account for endogeneity in peer ability, we instrument average peer ability with the average ability of the primary school peers of one’s high school peers. Our results show that peers have a moder-ately positive effect on test scores, and that being in a school with a large proportion of low-quality peers can have a significantly detrimental effect on achievements. Fur-thermore, peer ability seems to have a stronger effect on students at the bottom of the grade distribution, especially at age 16.