Human Capital Spillovers and the External Returns to Education

Pedro Portugal (), Hugo Reis, Paulo Guimaraes () and Ana Rute Cardoso ()
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Paulo Guimaraes: Banco de Portugal
Ana Rute Cardoso: IAE Barcelona (CSIC)

No 17690, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: wage distribution; human capital spillovers; external returns to education; peer effects; linked employer-employee data; high-dimensional fixed effects; workplace; job and occupation (search for similar items in EconPapers)
JEL-codes: I26 J24 J31 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2025-02
New Economics Papers: this item is included in nep-hrm and nep-lma
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