• Open Access

Does the rotten child spoil his companion? Spatial peer effects among children in rural India


  • Christian Helmers,

    1. Santa Clara University and SERC LSE; chelmers@scu.edu
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  • Manasa Patnam

    1. CREST (ENSAE); manasa.patnam@ensae.fr
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    • The authors thank the editor Orazio Attanasio, two anonymous referees, Quy-Toan Do, Markus Eberhardt, Marcel Fafchamps, Steve Gibbons, Xavi Gine, Paul Glewwe, Markus Goldstein, Manos Kitsios, Henry Overman, Hanan Jacoby, Stefan Klonner, Pramila Krishnan, Owen Ozier, Aureo de Paula, Pia Pinger, Biju Rao, and Matthias Schündeln for helpful discussions and comments. We also benefitted from the comments of participants at the DECRG Applied Micro and Poverty Seminar, a seminar at Goethe University Frankfurt, the Midwest Development Conference 2010, the 7th Annual Conference of the Verein für Socialpolitik Research Committee on Development Economics, the 25th Annual Congress of the European Economic Association 2010, the NEUDC Conference 2010, and the Econometric Society World Congress 2010 in Shanghai. We especially thank Sandhya Rao and Anamika Arora for help related to the Geographic Information System (GIS). The authors acknowledge Young Lives for providing household and GIS data for the purpose of this research. Young Lives (www.younglives.org.uk) is a long-term international research project that investigates the changing nature of childhood poverty. Young Lives is core-funded by U.K. aid from the Department for International Development (DFID) for the benefit of developing countries. Substudies are funded by the Bernard van Leer Foundation, the Inter-American Development Bank (in Peru), the International Development Research Centre (in Ethiopia), and the Oak Foundation. The views expressed are those of the authors. They are not necessarily those of, or endorsed by, Young Lives, the University of Oxford, DFID, or other funders.


This paper identifies the effect of neighborhood peer groups on childhood skill acquisition using observational data. We incorporate spatial peer interaction, defined as a child's nearest geographical neighbors, into a production function of child cognitive development in Andhra Pradesh, India. Our peer group definition takes the form of networks, whose structure allows us to identify endogenous peer effects and contextual effects separately. We exploit variation over time to avoid confounding correlated with social effects. Our results suggest that spatial peer and neighborhood effects are strongly positively associated with a child's cognitive skill formation. Further, we explore the effect of peer groups in helping to provide insurance against the negative impact of idiosyncratic shocks to child learning. We find that the data reject full risk-sharing, but cannot rule out the existence of partial risk-sharing on behalf of peers. We show that peer effects are robust to different specifications of peer interactions and investigate the sensitivity of our estimates to potential misspecification of the network structure using Monte Carlo experiments.