Identifying Peer Effects Using Gold Rushers

John Lynham, Publications, Working Papers

Fishers pay attention to where other fishers are fishing, suggesting the potential for peer effects. But peer effects are difficult to identify without an exogenous shifter of peer group membership. We propose an identification strategy that exploits a shifter of peer group membership: gold rushes of new entrants. Following an exchange-rate-induced gold rush in an American fishery, we find that new entrants are strongly influenced by the location choices of their peers. Overidentification tests suggest that the assumptions underlying identification hold when new entrants are inexperienced, but identification is lost as new entrants start to potentially influence their peers.