Job Market Paper

"No Kid is an Island: Peer Effects and Intergenerational Mobility"

Economic inequalities persist from one generation to the next. To what extent is this due to childrens’ social interactions mirroring parental disparities? While existing research documents parental investments and local economic conditions as crucial for social mobility, this paper studies the causal impact of social interactions on economic outcomes. Exploiting within school across cohort exogenous variation in schoolmates’ parental background among Danish high school students, I show that a $1 increase in average schoolmates’ parental earnings results in a $0.08 increase in adult earnings. This effect is as large as 42% of the parent-child correlation in earnings. I find that former schoolmates are connected on labor market networks: they join their peers’ firms and leverage school connections as outside options to secure higher wages, effectively benefiting from advantages inherited by their peers from their parents.