Identifying and Decomposing Peer Effects on Participation Decisions Using a Randomized Controlled Trial

         
Author Name SHIMAMOTO Daichi (Waseda University) / TODO Yasuyuki (Faculty Fellow, RIETI) / Yu Ri KIM (University of Tokyo) / Petr MATOUS (University of Sydney)
Creation Date/NO. August 2016 16-E-083
Research Project Firms' Domestic and International Networks
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Abstract

Utilizing a randomized controlled trial (RCT) in traditional clusters of apparel and textile firms in Vietnam, this paper investigates how firms' decisions to participate in seminars on export promotion are affected by their information exchange peers. We identify the effect of the number of peers participating in the seminars by using the number of randomly invited peers as an instrument. In addition, because we held three one-day seminars consecutively and invited each firm to one of the seminars, we can isolate the peer effects based on the reduction of the psychological costs of participation—or social utility—from other effects through information confirmation among the peer participants and free riding on peer information. We find that peers' participation in the seminars has a positive effect overall. To further decompose this positive effect, we distinguish between peers participating on the same day and other days, finding that the former has a positive effect while the latter has no significant effect. These results imply that peer effects arise mostly through the social utility channel. The presence of positive peer effects suggests that multiple equilibria in terms of the share of participants within each network of firms may emerge, which is also consistent with our observations.