Can Better Peers Signal Less Success?: The Disruptive Effect of Perceived Rank on Career Investment*

Is being among the best always the best? We separate the effects of perceived rank from peer quality in college and show that having better classmates increases the willingness to switch careers and reduces the likelihood of having a prestigious occupation. The effects are identified by a discontinuity in the class assignment of a flagship university in Brazil, along with the variation in peer skills across program cohorts. Our findings imply that the perceived rank sends a misleading signal, making similar students take distinct decisions. Higher parental education and stronger convictions about future earnings reduce the influence of this signal.