Self-Selection and Comparative Advantage in Social Interactions

43 Pages Posted: 8 Mar 2011

See all articles by Steve Cicala

Steve Cicala

University of Chicago

Roland G. Fryer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; University of Chicago

Jörg L. Spenkuch

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS)

Date Written: March 2017

Abstract

We propose a theory of social interactions based on self-selection and comparative advantage. In our model, students choose peer groups based on their comparative advantage within a social environment. The effect of moving a student into a different environment with higher-achieving peers depends on where in the ability distribution she falls and the shadow prices that clear the social market. We show that the model’s key prediction|an individual’s ordinal rank predicts her behavior and test scores|is borne out in one randomized controlled trial in Kenya as well as administrative data from the U.S. To test whether our selection mechanism can explain the effect of rank on outcomes, we conduct an experiment with nearly 600 public school students in Houston. The experimental results suggest that social interactions are mediated by self-selection based on comparative advantage.

Keywords: peer effects, social interactions, comparative advantage, ordinal rank

Suggested Citation

Cicala, Steve and Fryer, Roland G. and Spenkuch, Jörg L., Self-Selection and Comparative Advantage in Social Interactions (March 2017). Available at SSRN: https://ssrn.com/abstract=2957226 or http://dx.doi.org/10.2139/ssrn.1780652

Steve Cicala

University of Chicago ( email )

1155 East 60th Street
Chicago, IL 60637
United States

HOME PAGE: http://home.uchicago.edu/~scicala

Roland G. Fryer (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

American Bar Foundation

750 N. Lake Shore Drive
Chicago, IL 60611
United States

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Jörg L. Spenkuch

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

HOME PAGE: http://jspenkuch.github.io

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