The Determinants and Consequences of Friendship Composition

This paper examines the demographic pattern of friendship links among youth and the impact of those patterns on own educational outcomes using the friendship network data in the Add Health. We develop and estimate a reduced form matching model to predict friendship link formation and identify the parameters based on across-cohort, within school variation in the "supply" of potential friends. We find novel evidence showing that small increases in the share of students with college educated mothers raises the likelihood of friendship links among students with high maternal education, and that small increases in the share of minority students increases the level of racial homophily in friendship patterns. We then use the predicted friendship links from the matching model in an instrumental variable analysis, and find positive effects of friends' high socioeconomic status, as measured by parental education, on own GPA outcomes among girls. The GPA effects are likely driven by science and English grades, and through non-cognitive factors.