Peer effects and shadow education

Peer effects are crucial to school activities contributing to students' human capital accumulation. However, existing studies offer little evidence on how peers affect a student's private tutoring, commonly called shadow education, outside the formal schooling. This paper investigates peer effects on the student's shadow education activities by using an instrumental variable approach with a randomization sample of junior high school students in China. We find that an increase in the proportion of classmates receiving shadow education, defined as participating in cram schools or extracurricular courses, positively affects a student's shadow education participation, expenditure, and time spent on weekends. To corroborate the identification strategy validity, we conduct various robustness checks that consider exclusion restriction, peer characteristics, sample exclusion, and personality traits. Heterogeneous analyses suggest that peer effects are more pronounced among male students, students from high-income families, senior students, and public school students.