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High wage workers and high wage peers

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Abstract

This paper investigates the effect of coworker characteristics on wages, measured by the average person effect of coworkers in a wage regression. The effect of interest is identified from within-firm changes in workforce composition, controlling for person effects, firm effects, and sector-specific time trends. My estimates are based on a linked employer employee dataset for the population of workers and firms of the Italian region of Veneto for years 1982-2001. I find that a 0.1 increase in the average labour market value of coworkers’ skills (which is around one within-person standard deviation) is associated with a 3.6 percent wage premium. I also find that a sizeable share of the wage variation previously explained by unobserved individual and firm heterogeneity may be due to variation in coworker skills. An event-type study, a Placebo exercise and a series of heterogeneity analyses lend credibility to the baseline results. I also evaluate the role of the spillover effects for wage differentials between specific groups of workers. I find that around 12 percent of the gender wage gap and 10 to 16 percent of the immigrant wage gap can be explained by differences in coworker characteristics.

Suggested Citation

  • Battisti, Michele, 2017. "High wage workers and high wage peers," Labour Economics, Elsevier, vol. 46(C), pages 47-63.
  • Handle: RePEc:eee:labeco:v:46:y:2017:i:c:p:47-63
    DOI: 10.1016/j.labeco.2017.02.002
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    1. repec:eee:labeco:v:48:y:2017:i:c:p:105-119 is not listed on IDEAS
    2. Serafinelli, Michel, 2013. "Good Firms, Worker Flows and Productivity," MPRA Paper 49055, University Library of Munich, Germany, revised 12 Aug 2013.
    3. BELLINO, Antonella & CELI, Giuseppe, 2016. "The Migration-Trade Nexus in the Presence of Vertical and Horizontal Product Differentiation," CELPE Discussion Papers 137, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    4. Hartog, Joop & Raposo, Pedro, 2017. "Are starting wages reduced by an insurance premium for preventing wage decline? Testing the prediction of Harris and Holmstrom (1982)," Labour Economics, Elsevier, vol. 48(C), pages 105-119.
    5. Thomas Cornelissen & Christian Dustmann & Uta Schönberg, 2017. "Peer Effects in the Workplace," American Economic Review, American Economic Association, vol. 107(2), pages 425-456, February.
    6. Cardoso, Ana Rute & Guimaraes, Paulo & Portugal, Pedro & Reis, Hugo, 2018. "The Returns to Schooling Unveiled," IZA Discussion Papers 11419, Institute for the Study of Labor (IZA).
    7. Carlo Dell’Aringa & Claudio Lucifora & Laura Pagani, 2015. "Earnings differentials between immigrants and natives: the role of occupational attainment," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-18, December.

    More about this item

    Keywords

    Peer effects; Linked employer-employee dataset; Wage differentials;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J79 - Labor and Demographic Economics - - Labor Discrimination - - - Other

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