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Individuals often have biased perceptions about their peers' behavior. We use an economic equilibrium analysis to study the role social norms play in substance use decisions. Using a nationally representative dataset, we estimate the effect of misperception about friends' alcohol, smoking, and marijuana use on consumption of these substances by youths in grades 7-12. Overestimation of friend's substance use significantly increases adolescent's own use approximately 1 year later, and the estimated effect is robust across specifications including individual-level fixed effects regression. The effect size is bigger for boys than for girls. The estimates for those who initially underestimated the norm suggest the possibility of a rebound/boomerang effect.

This paper explores the role of peer effects on early sexual debut for a sample of adolescents using data from the National Longitudinal Study on Adolescent Health (Add Health). Most studies analyzing peer influences ignore the “reflection” problem that occurs with studying peer effects. To address the reflection problem, this paper employs a spatial econometric approach to estimate a social interactions model. This is the first study in the literature on adolescent risky sexual behavior to use this approach to estimate peer effects. Similar to other research on peer effects and adolescent risky sexual behavior, this paper finds the existence of peer effects. However, the more vital outcome from this study is that older and male peers increase the likelihood of adolescent early sexual debut, while peers whose mothers are more open about sexual activity decrease adolescent risky sexual behavior. This methodology can help further our knowledge about the social context that influences adolescent sexual behavior.

African-Americans, Marriage, Propensity score matching, Risky health behaviors,

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