Tracing the impact of peers on households' economic behavior

This paper investigates the impact of peer effects and characteristics on households' multifaceted economic behavior. Using data from a Dutch population-wide survey, where respondents also describe their close peers, we find no evidence that households consult their social circle when making economic and financial decisions. Furthermore, peer characteristics play a negligible role in formulating households' economic attitudes. We verify these results using instrumental variable estimation to uncover exogenous, rather than correlated, effects. These findings question previous research which, based on arbitrary assumptions in the construction of the social circle, emphasizes the role of social effects in financial decisions.