Peer Interactions, Local Markets, and Within Occupation Wages: Evidence From Italy

This paper explores how occupation‐specific urban wage premia (UWPs) relate to workplace peer interactions and population density. To this end, we use a unique Italian employer–employee dataset that combines administrative records on wages and individual labor market histories with detailed survey data on occupational characteristics. Our findings show that both peer interactions and population density positively influence local wages at the occupational level. However, the responsiveness of the UWP to population density is lower in occupations characterized by more intensive peer interactions. These results are robust to various occupational and worker‐level heterogeneities, as well as to potential endogeneity concerns.