Social interactions and college enrollment: A combined school fixed effects/instrumental variables approach.

This paper provides some of the first evidence of peer effects in college enrollment decisions. There are several empirical challenges in assessing the influences of peers in this context, including the endogeneity of high school, shared group-level unobservables, and identifying policy-relevant parameters of social interactions models. This paper addresses these issues by using an instrumental variables/fixed effects approach that compares students in the same school but different grade-levels who are thus exposed to different sets of classmates. In particular, plausibly exogenous variation in peers' parents' college expectations are used as an instrument for peers' college choices. Preferred specifications indicate that increasing a student's exposure to college-going peers by ten percentage points is predicted to raise the student's probability of enrolling in college by 4 percentage points. This effect is roughly half the magnitude of growing up in a household with married parents (vs. an unmarried household).