High wage workers and high wage peers

Battisti, M. (2017) High wage workers and high wage peers. Labour Economics, 46, pp. 47-63. (doi: 10.1016/j.labeco.2017.02.002)

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.

• Item Type: Articles
• Additional Information: Financial support by the Leibniz Association (SAW-2012-ifo-3) is gratefully acknowledged.
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Battisti, Professor Michele
• Authors: Battisti, M.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Labour Economics
• Publisher: Elsevier
• ISSN: 0927-5371
• ISSN (Online): 1879-1034
• Published Online: 20 February 2017