Clean Evidence on Peer Pressure

While confounding factors typically jeopardize the possibility of using observational data to measure peer effects, field experiments over the potential for obtaining clean evidence. In this paper we measure the output of subjects who were asked to stuff letters into envelopes, with a remuneration completely independent of output. We study two treatments. In the 'pair' treatment two subjects work at the same time in the same room. Peer effects are possible in this situation and imply that outputs within pairs should be similar. In the 'single' treatment, which serves as a control, subjects work alone in a room and peer effects are ruled out by design. Our main results are as follows: First, we find clear and unambiguous evidence for the existence of peer effects in the pair treatment. The standard deviations of output are significantly smaller within pairs than between pairs. Second, average output in the pair treatment largely exceeds output in the single treatment, i.e., peer effects raise productivity. Third, low productivity workers are significantly more sensitive to the behavior of peers than are high productivity workers. Our findings yield important implications for the design of the workplace.