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High Wage Workers and High Wage Peers

  • Michele Battisti


This paper investigates the effect of co-worker 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 personeffects, 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 regionof Veneto for years 1982–2001. I find that a 10 percent increase in the average labour market value of co-workers' skills is associated with a 3.6 percent wage premium. I alsofind that around one fourth of the wage variation previously explained by unobserved firm heterogeneity is actually due to variation in co-worker skills, and that between 10 and 15 percent of the immigrant wage gap can be explained by differences in coworkercharacteristics.

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Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 168.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ifowps:_168
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  1. Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 235-60, April.
  2. David Card & Francesco Devicienti & Agata Maida, 2010. "Rent-sharing, Holdup, and Wages: Evidence from Matched Panel Data," NBER Working Papers 16192, National Bureau of Economic Research, Inc.
  3. Heining, Jörg & Card, David & Kline, Patrick, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80034, Verein für Socialpolitik / German Economic Association.
  4. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September.
  5. Harminder Battu & Clive R. Belfield & Peter J. Sloane, 2003. "Human Capital Spillovers within the Workplace: Evidence for Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 575-594, December.
  6. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers 94s-23, CIRANO.
  7. Bagger, Jesper & Sørensen, Kenneth L. & Vejlin, Rune, 2013. "Wage sorting trends," Economics Letters, Elsevier, vol. 118(1), pages 63-67.
  8. Rasmus Lentz & Jesper Bagger, 2009. "An Empirical Model of Wage Dispersion with Sorting," 2009 Meeting Papers 964, Society for Economic Dynamics.
  9. Cristian Bartolucci & Francesco Devicienti, 2013. "BetterWorkers Move to Better Firms: A Simple Test to Identify Sorting," Carlo Alberto Notebooks 332, Collegio Carlo Alberto.
  10. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
  11. William A. Brock & Steven N. Durlauf, 2003. "Multinomial Choice with Social Interactions," NBER Technical Working Papers 0288, National Bureau of Economic Research, Inc.
  12. Marcus Dittrich & Andreas Knabe & Kristina Leipold, 2011. "Spillover Effects of Minimum Wages: Theory and Experimental Evidence," CESifo Working Paper Series 3576, CESifo Group Munich.
  13. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2009. "Social Connections and Incentives in the Workplace: Evidence From Personnel Data," Econometrica, Econometric Society, vol. 77(4), pages 1047-1094, 07.
  14. Cingano, Federico, 2003. "Returns to specific skills in industrial districts," Labour Economics, Elsevier, vol. 10(2), pages 149-164, April.
  15. Peter Arcidiacono & Gigi Foster & Natalie Goodpaster & Josh Kinsler, 2012. "Estimating spillovers using panel data, with an application to the classroom," Quantitative Economics, Econometric Society, vol. 3(3), pages 421-470, November.
  16. Joseph G. Altonji & Ching-I Huang & Christopher R. Taber, 2010. "Estimating the Cream Skimming Effect of School Choice," NBER Working Papers 16579, National Bureau of Economic Research, Inc.
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