Social Interactions and Competition in Shadow Education

Abstract

We examine the competition in shadow education inputs among students' parents under a social interaction framework by using a representative survey of middle school students in China. Based on the data structure and the identification issues, we apply spatial Tobit models and find that the competition does exist but will be overestimated if we overlook the reflection problem. Moreover, the competition effect is higher of the more observable outcome for agents in the same reference group. Heterogeneity analyses indicate that the competition reaction is stronger for parents with 9th-grade children and for parents whose children may have competitive disadvantages in the future. The competition is more intense among parents who have similar attributes, thus may communicate more frequently. The competition level is higher during the beginning of an academic year.