Peer Effects and Friendship Network Diversity: Evidence from U.S. Adolescents

Shanshan Wang, University of Illinois at Urbana-Champaign
Yilan Xu, University of Illinois at Urbana-Champaign

This paper provides a new mechanism based on friendship network, explaining how school diversity affects an individual’s friendship network composition, and further influences the education outcomes in the United States. Using a unique data set with friendship nomination information for 517 U.S. high school adolescents, we investigate whether friends of same immigration status or ethnicity have greater peer effects than friends of different types. Furthermore, we examine whether network diversity improves adolescents’ education achievement. We split the weighting matrix under a spatial econometrics framework to distinguish influences from the two groups of friends. The empirical results show that adolescents benefit more from same type of friends than different types in test grade and mental health. This is because adolescents seek similarity in an unnatural matching process. However, adolescents participate more in extra curriculum activities if their different-type peers increase the participation, suggesting diversity-seeking behaviors outside the classroom.