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This paper shows that the group composition matters for the effectiveness oflabor market training programs for jobseekers. Using rich administrative datafrom Germany, I document that greater average exposure to highly employablepeers leads to increased employment stability after program participation. Peereffects on earnings are positive and long-lasting in classic vocationaltraining and negative but of short duration in retraining, pointing todifferent mechanisms. Finally, I also find evidence for non-linearities ineffects and show that more heterogeneity in the peer group is detrimental.

Peer Effects in Labor Market Training