Wage inequality, productivity, peer effects and assortative matching

Using a remarkable matched employer-employee dataset, this thesis investigates how wage dispersion evolved in Portugal and whose components contributed more to this variation, highlighting the impact of peer effects in both individual wages and wage inequality. A regression model with high dimensional fixed effects is used. The results show that, contrary to the case of Germany, wage dispersion in Portugal has decreased over the last decade. Person effects are the main contributors, with its contribution rising over time, contrasting with the declining role of firm effects. The role of peer effects in wage dispersion ranges between 4.2% and 6.6%, with a one standard deviation increase impacting on individual wages with that same magnitude