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Human Capital Spillovers and Returns to Education
I26 - Returns to Education
J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
In this paper, we quantify the impact of co-workers’ human capital on a worker’s productivity and, more specifically, the spillovers of co-workers’ education within the workplace. We identify the impact of peer quality and provide an unambiguous decomposition of the impact of unobserved heterogeneity on the estimated returns to education. We find that peer effects are quite sizeable. A one standard deviation increase in the measure of peer quality leads to a wage increase of 2.1 percent. We also unveil that an additional year of average education of co-workers yields a 0.5 percent increase in the individual own wage.