Armin Falk and Andrea Ichino, “Clean Evidence on Peer Effects [pdf].” Journal of Labor Economics 24(1): 39-57, 2006.
• Observational methods make it hard to separate out peer effects from birds of a feather flocking together, or from a shared environment.
• Here, the authors use random assignment to either a peer setting or to a solo task; the task is envelope stuffing. The existence of peer effects would lead to stronger correlation between peers than between unmatched others.
• The authors find the requisite correlation, as well as evidence that the peer effects raise average productivity (mainly by raising the output of the less productive person).
• The workers were Swiss high school students, given the envelope-stuffing job that paid more than $60 for a four-hour session. Peers worked separately but near each other. The total number of participants was but 24, eight of whom were in the solo condition.
• They find that if one peer raises output by one unit, the other person raises output by .14 unit.
• Would a non-working peer also tend to increase the output of a worker, by providing a sort of supervision?
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