Iourii ManovskiiXin, Jianhong2023-05-222001-01-012022-09-172022-01-012022-09-17https://repository.upenn.edu/handle/20.500.14332/31869Observed worker and firm characteristics only explain a small wage variation. Beyond characteristics that are directly observed from the data, my thesis develops new empirical methods aimed at identifying unobserved heterogeneity in the labor market. Chapter 1 proposes an empirical method to measure the effects of coworkers on wages. I take advantage of the recent cutting-edge clustering method that combines machine-learning and economic theory to identify groups of workers with similar latent productivity type. I further apply the cluster-based method to identify the effects of coworkers on wages and evaluate their economic implications in empirical-relevant simulations. The proposed method has proven potential to be applied to the real-world data to improve our ability to understand the role of coworkers in substantive questions where existing methods have limitations.100 p.application/pdfJianhong XinEconomicsDissertation/Thesis