Peer Effects in Human Capital Investment Decisions and Gender Differences

In recent years, as workers' career aspirations have become increasingly diverse, it is essential to encourage them to invest autonomously in their human capital. Coworkers (peers) play important roles in affecting attitudes in a real workplace with social interactions. This study examines the influence of coworkers' human capital accumulation on employees' willingness to invest (as a peer effect). We focus on overseas assignment, which is one aspect of job assignments, as an indicator of autonomous human capital investment decision-making. Specifically, utilizing unique personnel data from a large trading firm, we investigate the effect of peers’ overseas experiences on focal workers’ willingness to work overseas and whether the effect differs by gender. A peer group is defined as the cohort of workers who enter the firm in the same year and which feel a strong sense of membership and a have competitive relationship with other members. In order to mitigate potential endogeneity problems, we employ a model in which the overseas work experience of bosses of peers at different workplaces from focal workers is an instrument variable . Our results show that overseas experience of male peers has significantly positive effects on human capital investment decisions of male employees: the more male peers experienced working overseas, the more willing male workers became to undertake similar assignments. On the other hand, we do not detect the peer effects on female workers. This implies that the underlying mechanism of peer effects may be competitive rivalry. The findings of this study have managerial implications for designing competition in firms.