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Clean Evidence on Peer Effects

University of Bonn, IZA, CEPR, and CESifoEuropean University Institute, IZA, CEPR, and CESifo

We study subjects who were asked to fill letters into envelopes with a remuneration independent of output. In the “pair” treatment, two subjects worked at the same time in the same room, and peer effects were possible. In the “single” treatment, subjects worked alone, and peer effects were ruled out. We find evidence of peer effects in the pair treatment because the standard deviations of output are smaller within pairs than between pairs. Moreover, average output is higher in the pair treatment: thus, peer effects raise productivity. Finally, low‐productivity workers are the most sensitive to the behavior of peers.