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Abstract
We study peer effects on the formation of beliefs regarding college participation. We present a structural model of learning in friendship networks. We show that the model is identified and we present a Bayesian estimation procedure. We estimate the model using data on teenagers’ beliefs regarding college participation, controlling for preferences and academic achievement. We find that, on average, friends’ beliefs account for about 12% of the updating process. We also find strong heterogeneity among schools and individuals. In particular, we find substantial unobserved individual heterogeneity, which casts doubt on the efficiency of network-targeted public policies.
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