Disruptive peers and the estimation of teacher value added

•Emotionally disabled (ED) transfer students reduce their peers’ academic achievement.•Teaching in grades with ED transfer students reduces estimated teacher value added.•The peer effects do not impact the evaluation of all teachers equally due to sorting.

Classroom disruption is often cited as an obstacle to effective teaching, yet little is known regarding how disruptive students influence classroom learning and teacher evaluation. In this study, we show that students with serious behavioral difficulties substantially reduce the academic performance of their peers. Since standard value-added models fail to account for these peer effects, we find that some teachers’ value added is penalized because of the students she is assigned. Importantly, we show that the assignment of disruptive students to teachers is non-random, so these peer effects do not impact the evaluation of all teachers equally.