Abstract
This paper studies how a student’s ordinal rank in a peer group affects performance and specialisation choices in university. By exploiting data with repeated random assignment of students to teaching sections, we find that a higher rank increases performance and the probability of choosing related follow-up courses and majors. We document two types of dynamic effects. First, earlier ranks are less important than later ranks. Second, responses to rank changes are asymmetric: improvements in rank raise performance, while decreases in rank have no effect. Rank effects partially operate through students’ expectations about future grades.
Highlights
In this paper we study how a student’s ordinal rank in a peer group affects performance and specialisation choices in university
Unlike in most previous studies—where the same peers interact for many years—we show that even brief social interactions are sufficient to produce substantial rank effects
This and the following tables report coefficients from separate regressions of the dependent variables shown in the column headers on the ordinal rank, adjusted for a third-order polynomial in pre-determined grade point average (GPA), individual characteristics and the fixed effects listed at the bottom
Summary
In this paper we study how a student’s ordinal rank in a peer group affects performance and specialisation choices in university. Between two otherwise identical people, the person with the higher relative ability tends to be more confident and believes that she is more capable than others.1 Through this mechanism, a student’s relative ability early in her career may influence her expected returns and affect her effort, performance and later career choices. We document the importance of a student’s relative ability for performance and specialisation choices in university. The synthetic/simulated data and the codes for the parts subject to exemption are available on the Journal website. They were checked for their ability to generate all tables and figures in the paper; the synthetic/simulated data are not designed to reproduce the same results
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