Ingo Isphording (IZA)
"Achievement Rank Affects Perfomance and Major Choices in College"
We study how students' performance and educational choices are affected by their relative academic ability among direct peers. In a quasi-experimental setting we show that students perform better when they rank highly in randomly assigned peer groups. We reject that effects operate through an adjustments of students study efforts. We further show that small random variation in relative rank affects consecutive subject specialization choices. Our results suggest that relative rank comparisons have lasting effects on human capital accumulation and educational decisions.