Poverty spillovers in human capital Formation: Evidence from randomized class assignments in China

This paper investigates the spillover effects of peer poverty on student outcomes using data from a nationally representative, randomly assigned sample of junior high school classes in China. We find that higher classroom poverty rates significantly reduce students' academic performance, non-cognitive skills, and the likelihood of high school and college enrollment. These effects are particularly pronounced among students from lowerincome families, while the presence of wealthier peers provides yields little benefit. Mechanisms driving these outcomes include diminished student motivation, poorer classroom climates, reduced parental involvement, and lower teacher attention. Our findings provide new evidence on the impact of peer socio-economic status on student achievement and long-term educational trajectories.