The belief that both the behavior and outcomes of students are affected\ud by their peers is important in shaping education policy. I analyze two polar\ud education systems -tracking and mixing- and propose several criteria for their\ud comparison. I find that tracking is the system that maximizes average human\ud capital in societies where the distribution of pre-school achievement is not\ud very dispersed. I also find that when peer effects and individuals’ pre-school\ud achievement are close substitutes, all risk averse individuals prefer mixing
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