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Peer Effects, Cooperation and Competition in Human Capital Formation

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  • Román Andrés Zárate

Abstract

Economic literature has identified positive effects of peer abilities on individual achievement. However, the intuitive arguments supporting this evidence are not clear. This article presents a specific mechanism: cooperation and competition among group members; more precisely, the presence of positive and negative externalities in human capital accumulation. First, I develop an economic model that incorporates both kinds of externalities and shows the existence of an optimal level of competition between group members that maximizes human capital accumulation. Then, using data from PISA (2000) and an empirical strategy that controls for potential endogeneity issues, I find empirical evidence supporting the main results of the theoretical model. Namely, I find robust evidence of a non-linear effect of competition on academic performance. These results are consistent with the proposed model and the presence of positivetechnological externalities in educational production functions.

Suggested Citation

  • Román Andrés Zárate, 2012. "Peer Effects, Cooperation and Competition in Human Capital Formation," Documentos CEDE 9795, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:009795
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    References listed on IDEAS

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    More about this item

    Keywords

    Peer effects; Cooperation; Competition; PISA;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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