Peer Effects in Program Participation

67 Pages Posted: 7 Jul 2012

See all articles by Gordon B. Dahl

Gordon B. Dahl

UC San Diego - Department of Economics; National Bureau of Economic Research (NBER); University of Rochester - Department of Economics

Katrine Vellesen Løken

University of Bergen - Department of Economics

Magne Mogstad

University of Chicago

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Abstract

The influence of peers could play an important role in the take up of social programs. However, estimating peer effects has proven challenging given the problems of reflection, correlated unobservables, and endogenous group membership. We overcome these identification issues in the context of paid paternity leave in Norway using a regression discontinuity design. Our approach differs from existing literature which attempts to measure peer effects by exploiting random assignment to peer groups; in contrast, we study peer effects in naturally occurring peer groups, but exploit random variation in the "price" of a social program for a subset of individuals. Fathers of children born after April 1, 1993 in Norway were eligible for one month of governmental paid paternity leave, while fathers of children born before this cutoff were not. There is a sharp increase in fathers taking paternity leave immediately after the reform, with take up rising from 3% to 35%. While this quasi-random variation changed the cost of paternity leave for some fathers and not others, it did not directly affect the cost for the father's coworkers or brothers. Therefore, any effect on the brother or the coworker can be attributed to the influence of the peer father in their network. Our key findings on peer effects are four-fold. First, we find strong evidence for substantial peer effects of program participation in both workplace and family networks. Coworkers and brothers are 11 and 15 percentage points, respectively, more likely to take paternity leave if their peer father was induced to take up leave by the reform. Second, the most likely mechanism is information transmission about costs and benefits, including increased knowledge of how an employer will react. Third, there is essential heterogeneity in the size of the peer effect depending on the strength of ties between peers, highlighting the importance of duration, intensity, and frequency of social interactions. Fourth, the estimated peer effect gets amplified over time, with each subsequent birth exhibiting a snowball effect as the original peer father's influence cascades through a firm. Our findings demonstrate that peer effects can lead to long-run equilibrium participation rates which are substantially higher than would otherwise be expected.

Keywords: social interactions, peer effects, program participation

JEL Classification: D62, J13, I38

Suggested Citation

Dahl, Gordon B. and Løken, Katrine Vellesen and Mogstad, Magne, Peer Effects in Program Participation. IZA Discussion Paper No. 6681, Available at SSRN: https://ssrn.com/abstract=2101948

Gordon B. Dahl (Contact Author)

UC San Diego - Department of Economics ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Rochester - Department of Economics

Harkness Hall
Rochester, NY 14627
United States

Katrine Vellesen Løken

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

Magne Mogstad

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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