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  5. The Long-Term Impacts of Mixing the Rich and Poor: Evidence from Conscript Dorms

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

The Long-Term Impacts of Mixing the Rich and Poor: Evidence from Conscript Dorms

  • Elias Einiö
American Economic Journal: Applied Economics (Forthcoming)

Abstract

To what extent is economic success determined by with whom individuals interact socially? We tackle this question by exploiting a large-scale natural experiment in the Finnish conscription. Our research design is based on the alphabetization of dorms, which is shown to induce as good as random variation in peer composition. Exposure to a dormmate from a high-income family has a positive impact on earnings, with the largest effect among individuals from high-income families. For them, a one-standard-deviation increase in dormmates' parental income increases long-term earnings by 5.7%. The results support labor market networks among the rich as the key mechanism.

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