Can Better Peers Signal Less Success? The Effect of Class Assignment on Career Investment
76 Pages Posted: 7 Mar 2018 Last revised: 8 Feb 2019
Date Written: February 6, 2019
Given a discontinuity in the class assignment of a flagship university in Brazil, we find that having better classmates increases the willingness to switch careers and reduces the likelihood of a prestigious occupation. Moreover, the more similar the peers are between classes, the higher these effects. This suggests that on average the effect of perceived rank dominates the effect of peer quality. Although peer quality contributes to human capital, the perceived rank alone sends a misleading signal, making similar students take distinct decisions. Higher parental education and stronger convictions about future earnings reduce the influence of this signal.
Keywords: Perceived Rank, Peer Quality, Career Change, College Graduation, Future Occupation, Earnings
JEL Classification: D84, D91, I21, I23, J24
Suggested Citation: Suggested Citation