The Impact of Peers on Occupational Choice and Long-Term Outcomes

Abstract

Children are exposed to very different peers in childhood depending on where they grow up and which schools they attend. In this paper, we study the population-wide, long-term effect of peer composition in childhood on individuals' future occupational choices. We use within-school, across-cohort variation to identify the effects of peers on occupational choice and other outcomes. Using rich, population-wide administrative data from Finland, we show that a one standard deviation increase in exposure to children from a white collar parental background at age 15 has a significant effect on the likelihood of being in a white collar occupation at age 30. Furthermore, we show that there is a stronger effect at finer occupational levels and that these effects are strongest when one's own parent is from a different occupation. Finally, we compare the effect of schoolmates to those of other social ties. We find that the causal effects of peers in the neighborhood, while significant, are about half as large as the causal effects of peers in school.

Keywords: Labor economics, Occupational choice, Peers