.ISSN (e) 1759-7331
(print) 1759-7323
Quantitative Economics
An open-access journal in quantitative economics
Journal of the
Econometric Society
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Quantitative Economics, Volume 3, Issue 3 (November 2012)

Estimating spillovers using panel data, with an application to the classroom

Peter Arcidiacono, Gigi Foster, Natalie Goodpaster, Josh Kinsler


Obtaining consistent estimates of spillovers in an educational context is ham-
pered by at least two issues: selection into peer groups and peer effects emanat-
ing from unobservable characteristics. We develop an algorithm for estimating
spillovers using panel data that addresses both of these problems. The key inno-
vation is to allow the spillover to operate through the fixed effects of a student’s
peers. The only data requirements are multiple outcomes per student and hetero-
geneity in the peer group over time. We first show that the nonlinear least squares
estimate of the spillover parameter is consistent and asymptotically normal for a
fixed T . We then provide an iterative estimation algorithm that is easy to imple-
ment and converges to the nonlinear least squares solution. Using University of
Maryland transcript data, we find statistically significant peer effects on course
grades, particularly in courses of a collaborative nature. We compare our method
with traditional approaches to the estimation of peer effects, and quantify sepa-
rately the biases associated with selection and spillovers through peer unobserv-
Keywords. Panel data, fixed effects, peer effects, education.
JEL classification. C18, C23, I21.

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