Purpose While peer effects in education have been extensively studied in developed countries, there has been limited investigation of how physical proximity shapes academic achievement in rural educational settings. This study examines peer effects among primary school students in rural China and investigates whether these effects operate differently across student ability levels through distinct mechanisms. Design/methodology/approach Data from 2,956 primary school students across rural counties in Shaanxi Province, China, were analyzed. We employ an instrumental variable approach using physical distance between students in classroom seating arrangements to address endogeneity in peer group formation. Study group formation is measured through student-reported study partnerships, while academic performance is assessed using standardized mathematics test scores. Findings Study groups significantly enhance student achievement, with heterogeneous effects across ability levels. Middle tercile students show the strongest peer effects (0.318 standard deviations), compared to bottom tercile students (0.241 standard deviations). Mechanism analysis reveals that peer effects operate primarily through improved intrinsic motivation, enhanced self-concept, and reduced academic anxiety among middle-performing students, while effects for bottom tercile students operate through alternative pathways not captured in our measures. Research limitations/implications Our findings inform cost-efficient policy interventions in both educational institutions and corporate environments. The evidence indicates that optimizing spatial proximity in peer networks represents an efficient policy instrument for human capital accumulation, particularly valuable in resource-constrained settings, as it leverages existing human capital without substantial additional inputs. Originality/value This study provides the first evidence of peer effects using classroom seating arrangements as an identification strategy in a developing country/rural community context. The paper demonstrates that optimizing peer proximity represents a cost-efficient policy instrument for human capital development in resource-constrained rural areas, offering important implications for educational policy in agricultural communities where traditional educational resources are limited.
Y et al. (Mon,) studied this question.