Many university students' subject choice is swayed by their peers. But at what price? Giacomo De Giorgi (Stanford), Michele Pellizzari (IGIER-Bocconi) and Silvia Redaelli (Bocconi) find it is quite sizeable, in their new paper Be As Careful of the Books You Read as of the Company You Keep. Evidence on Peer Effects in Educational Choices (PDF). They find that peers’ behavior does have an important and significant effect on the choice of college major:
Using a unique dataset of students at Bocconi University and exploiting the peculiar organization of teaching at this institution, we are able to identify the endogenous effect of peers on such decision, circumventing the crucial identification problems in studies of social interactions.
Results show that, indeed, one is more likely to choose a major when many of his/her peers make the same choice. We estimate that, when it diverts students from majors in which they seem to have a relative ability advantage, this effect leads to lower average grades and graduation mark, a penalty that in the labor market could cost up to 871 euros (1,117 USD) a year.
For those in England, you can catch Michele Pellizzari present the paper next Monday afternoon, 5 March, at an ISER Seminar at the University of Essex.