Peer effects in the hierarchy: Evidence from the workplace

Abstract

This paper studies consumption peer effect and its relation to promotion from a unique hierarchical perspective, using credit card data of employees in the workplace. We show that one's consumption is significantly influenced by coworkers at the same or higher levels, with a stronger peer effect observed among those who are more likely to be promoted. We also find that the peer effect rises before and falls after a promotion event for the promoted workers. These results highlight the interplay between peer effects and hierarchy within the firm.