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In this paper I use a rich dataset in order to observe each student over time in different subjects and courses. Unlike most peer studies, I identify the peers and the teachers that each student has had in every classroom. This enables me to handle the simultaneity and selection problems, which are inherent in estimating peer effects in the educational production function. I use a value-added approach with lagged peer achievement to avoid simultaneity and extensive fixed effects to rule out selection. To be specific, it is within-student across-subject variation with additional controls for time-invariant teacher characteristics that is exploited. Moreover, I identify students that are attending classes in which they have no peers from earlier education which otherwise could bias the result. I find positive peer effects for the average student but also that there is a non-linear dimension. Lower-achieving students benefit more from an increase in both mean peer achievement and the spread in peer achievement within the classroom than their higher-achieving peers.

Whether or not to differentiate - or track - students according to ability has been debated over the years. In Sweden, secondary schools that practiced tracking and schools that did not practice tracking existed simultaneously from 1980 to 1997. This variation in tracking status between schools is used in a differences-in-differences approach. I estimate whether tracking math, or not, in Swedish secondary school had any effect on the probability of having graduated upper-secondary school, but also whether tracking had any consequence for the math grade in upper-secondary school. The results show that when considering the attainmentof upper-secondary education and the mean achievement in math, there are no effects oftracking. However, there are effects when estimating the probability of receiving a specific grade, i.e. fail, pass, pass with distinction or pass with special distinction. Tracked students,from families with low-educated parents, are more likely to fail math than similar students ina non-tracked environment.