Abstract
Using the historical random assignment of MBA students to peer groups at an elite business school in the United States, I explore the effect of the gender composition of a student's peers on the gender-wage gap at graduation, the characteristics of first jobs accepted after graduation, and on long-term outcomes. I find that a 10-percentage point increase in the share of male peers in a student's peer group leads to a 2.1 percent increase in the salaries of female students at graduation, closing the gender gap in salaries at graduation by approximately two-thirds. In addition, I find that peer gender composition has long-term effects on the earnings of female MBAs. Using novel data on job offers, I examine both human capital explanations as well as a change in the willingness-to-accept (WTA) the maximum salary offered within their offer set. The results indicate that the effect of peers on long-term earnings is almost entirely driven by changes in initial choices at graduation. Importantly, while the change in human capital choices induced by peers does not immediately effect women's salaries at graduation, I show that such peer-induced changes in human capital place female students on different long-term expected earnings paths. By distinguishing between the effect of peers on the offer set from the effect on choices that female students make from within their offer set, this paper offers an explanation for why the effects of peer gender composition on earnings appear small or negligible in the years immediately following graduation but grow larger over time. These results reveal some underlying mechanisms through which the gender-wage gap can accumulate to the documented magnitudes over the course of the lifecycle, but also how the school peer environment can influence the initial conditions of the career and mitigate some of these effects in growing proportion as well.