%0 Report
        %A Tanaka, Ryuichi
%A Wang, Tong
        %T How Do Classmates Matter for the Class-Size Effects?
        %D 2025
        %8 2025 Jul
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 18025
        %U https://www.iza.org/publications/dp18025
        %X This paper investigates the effect of class-size reduction on students’ academic outcomes, with a particular emphasis on its heterogeneity based on classmates’ characteristics. We estimate the causal effects of class-size reduction on students’ mathematics and language test scores by controlling for student and teacher fixed effects. To address potential endogeneity, we employ the predicted class size with a cap as an instrumental variable for the actual class size. Utilizing rich panel data on Japanese primary school students, our findings indicate a positive and robust average effect of class-size reduction
on mathematics test scores. Furthermore, we find that classes with high-ability classmates benefit even more from class-size reduction in terms of language test scores. The effect of class-size reduction on mathematics test scores is found to depend positively on the ability of the lowest-achieving student in a class. Additionally, classes with a higher proportion of female students tend to benefit more from class-size reduction. Our results lend support to the theoretical framework proposed by Lazear (2001).
        %K class-size reduction
%K test scores
%K education
%K ability
%K heterogeneity