Title: Treated Together: Spillovers Among Youths Admitted to Residential Treatment

Abstract: Individuals struggling with substance abuse and self-harm are often treated in group-based programs. However, concerns have been raised about the risk of adverse outcomes through peer-to-peer spillovers. This paper analyses the effects of peers placed in residential treatment facilities on each other's outcomes. I use novel data on the universe of youths (over 16,000) admitted to state-owned treatment facilities in Sweden between 2000 and 2020. To overcome the issue of nonrandom assignment of youths, I use an IV design and exploit the natural flow of youths to and from facilities within a given year. I find strong evidence of reinforcing peer effects in substance abuse and self-harm: exposing youths with a history of substance abuse (self-harm) to peers with a similar background greatly increases the risk of hospitalization due to substance abuse (self-harm) post-discharge. Social influence is a likely mediator. Moreover, increased exposure to peer substance abuse has a significant negative impact on youths' educational attainment, partly through the effect on own substance abuse.