TY  - JOUR
AU  - Carrell,Scott E.
AU  - Sacerdote,Bruce I.
AU  - West,James E.
TI  - From Natural Variation to Optimal Policy? The Lucas Critique Meets Peer Effects
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16865
PY  - 2011
Y2  - March 2011
UR  - http://www.nber.org/papers/w16865
L1  - http://www.nber.org/papers/w16865.pdf
N1  - Author contact info:
Scott E. Carrell
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA 95616
Tel: 530/302-1038
Fax: 530/752-9382
E-Mail: secarrell@ucdavis.edu

Bruce Sacerdote
6106 Rockefeller Hall
Department of Economics
Dartmouth College
Hanover, NH 03755-3514
Tel: 603/646-2121
Fax: 603/646-2122
E-Mail: Bruce.I.Sacerdote@dartmouth.edu

James West
Baylor University
Department of Economics
One Bear Place # 98003
Waco, TX  76798-8003
Tel: 254-710-6126
Fax: 254-710-6142
E-Mail: j_west@baylor.edu
AB  - We take cohorts of entering freshmen at the United States Air Force Academy and assign half to peer groups with the goal of maximizing the academic performance of the lowest ability students. Our assignment algorithm uses peer effects estimates from the observational data. We find a negative and significant treatment effect for the students we intended to help. We show that within our “optimal” peer groups, students self-selected into bifurcated sub-groups with social dynamics entirely different from those in the observational data. Our results suggest that using reduced-form estimates to make out-of-sample policy predictions can lead to unanticipated outcomes.
ER  -