Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314587 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17690
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We employ a regression model with spillover effects to show that the impact of peer quality on wages is quite large. We estimate that a 10 percent increase in peer quality implies a 2.1 percent increase in an individual's wage. In addition, we estimate the external returns to education using a novel identification strategy, which is strictly based on the peer effect channel, netting out the role of homophily and labor market sorting. We show that a one-year increase in the co-workers' education leads to a 0.58 percent increase in wages. We also show that both effects fade smoothly over time.
Subjects: 
wage distribution
human capital spillovers
external returns to education
peer effects
linked employer-employee data
high-dimensional fixed effects
workplace
job and occupation
JEL: 
J31
J24
I26
Document Type: 
Working Paper

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