Achievement Rank Affects Performance and Major Choices in College

The paper presented in this ZEW Research Seminar analyses how student performance and specialization decisions are affected by a student’s ordinal achievement rank in a peer group. Exploiting a setting with randomly assigned groups, we find that students with a higher rank in their group achieve higher grades and become more likely to graduate. Moreover, if students have a high rank in a particular subject, they are more likely to choose related follow-up courses and majors. We provide evidence on altered self-perceptions about one’s ability as a likely mechanism. Our results highlight the importance of relative comparisons, with lasting effects on human capital investment and educational decisions.