The Persistent Effects of Short-Term Peer Groups on Performance: Evidence from a Natural Experiment in Higher Education

This paper studies the persistent effects of short-term peer exposure on long-run performance in a college setting. I exploit the random assignment of undergraduates to peer groups during a mandatory orientation week and track the students' performance over four years (until graduation). Assignment to orientation week groups with high levels of peer ability is associated with lower performance during the first year at college and a higher probability of early dropout. These adverse effects are driven entirely by the exposure of low-ability students to high-ability peers. Beyond the first year, exposure to higher peer ability during the orientation week negatively affects selection into the college's most popular major (business administration) and final grade point average. Taken together, the findings suggest that the composition of short-term peer groups matters for individual choices and long-run performance outcomes.